Role and Importance: To business or industry


To Business

  Many writers comment on the link between a sound insurance market and industrial development. Mehr and Cammack, the American writers on insurance, observe in their book 'Principles of Insurance' that the rise of Britain as great trading nation and the fact that it had good fire insurance facilities during the same period was no coincidence

 1. Uncertainty of business loss is reduced:

 A firm makes use of large number of assets. The slightest negligence may turn these assets to ashes. Buying insurance allows the entrepreneur to transfer some parts of risk to the insurer

2. Business efficiency is increased with insurance:

 Insurance acts as a stimulus for business. In the absence of insurance, firms will have to set aside certain portion of their earnings as reserve for contingencies such as fire, theft etc. resulting in capital lock Because of the existence of insurance the firms can now invest in productive channels without locking its funds

3. Key man indemnification:

A key man can be anybody with specialized skills, whose loss can cause a financial strain to the company. Such persons are eligible for Key man insurance. For example, they could money be: Directors of a company, active partner in a partnership business, Key sales people, Key project Managers or people suddenly with specific skills. Keyman insurance provides the firm with the unique opportunity to protect its business against the unfortunate loss of key people. It provides valuable tax advantage and a lovely tool to encourage loyalty of employees.

4. Enhancement of credit:

Business organizations can obtain loan by pledging the policy as collateral for the loan. Even if the borrower is not in a position to clear the debt, the lender can surrender the policy and get the amount of loan and interest repaid. In fact, insurance policies are the best collateral for business loans.

5. Welfare on the employees:

Of late, there has been growing tendency for the firms . to enter the field of insurance, especially with respect to safeguarding workers against sickness and disability. Many employers sponsor group insurance policies for their employees. Such policies generally include not only life insurance, but sickness and accident benefits and old- age the pensions, Such schemes would help the organization to retain their employees

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