Secondary Function of Insurance
Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. Insurance may be described as a social device to reduce or eliminate risks of loss to life and property. “Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to insure themselves against the risk.” – M.N. MISHRA.
Secondary Function focus on –
- Prevention of loss
- Provision of Capital
- Improvement of efficiency
- Ensuring the welfare of the Society…
Prevention of loss: The insurance joins hands with those institutions which are engaged in preventing the loss of society because of the reductions in loss cause lesser payment to the assured and so more. Saving is possible which will assist in reducing the premium. Lesser premium invites more business and more business cause lesser share to the assured.
It Provides capital: The insurance provides capital to the society. The accumulated funds are invested in the productive channel. The death of the capital of the society is minimized to a greater extent with the help of investment of insurance. The industry, the business and the individual are benefited by the investment and loans of the insurers.
It improves efficiency: The insurance eliminates worries and miseries of losses, at death and destruction of property. The carefree person can devote his body and soul together for achievement. It improves not only his efficiency but the efficiencies of the masses are also advanced.
It helps economic progress: The insurance by protecting society from huge losses of damage, destruction and death, provides an initiative to work hard for the betterment of the masses. The property, the valuable asset, the man, the machine and the society cannot lose much at the disaster.