Secondary Function

An insurance company performs the following secondary function:

1)      Provides capital: Insurance company collects small amount of money in the form of premium from various persons and organizations. Thus, insurance companies help for capital formation. The capital can be invested into different productive sectors which is helpful for the economic development of the country.

2)      Increases efficiency: Insurance eliminates the worries of losses and risks providing security against the losses. When people are free from the tension of unexpected losses, they can devote their  time for better achievement. As a result, efficiency of people increases in their works due to the insurance of life and properties.

3)      Supports in economic progress: Insurance provides security against the losses and damages. It helps to create better working environment ensuring to compensate the financial losses arising due to unexpected events. It provides initiation for hard work. As a result, industrial and trading activities flourish in the country, which improve the economic status of the people. Ultimately, it leads to the economic progress of the country.

4)      Makes aware to prevent losses: Insurance provides protection and certainty against the uncertain events that cause the losses of life and property. In reality, it helps to minimize the losses but does not stop the risks and losses It makes people aware about risk and uncertainties by conducting various training programs. These programs help to prevent losses bringing awareness about such risks and uncertainties of lives and properties.

5)      Helps in foreign trade: Insurance plays very important role in promoting foreign trade. In foreign trade, goods are transported through water ways. While transporting goods through the means of water transportation, the importer exposed to a number of risks. The insurance helps in minimizing all such risks of financial losses assuring him to make financial compensation in consideration of insurance premium. As a result, import and export trade becomes riskless and convenient.

6)      Helps to minimize social problems: The people of the society exposed to a number of personal risks due to their accidental death, unemployment, disability etc. Such events bring a serious economical problem to the individual and his dependents. In such circumstances, the insurance is considered as an effective measure to minimize such social problem. For this, insurance provides financial compensation against the losses due to such events.