Insurance plays a part in economic developmentDid You Know? Maizviziva here?
Why we need insurance and why it is essential for a healthy economy.
Did you know, that a world without insurance would be much less developed and stable? Leading world economists have demonstrated that economic growth and insurance development are interdependent. So a strong national insurance sector mirrors a strong economic system, which in turn creates higher employment.
Insurance helps the world ‘get on with life’
A well-developed insurance industry decreases the level of economic risk for individuals and firms, which leads to greater economic activity. If insurance did exist, a large proportion of the economy would not exist either. Without a reliable mechanism for mutualisation – or the pooling and transferring of risk – a large portion of economic activity would simply not take place.
The insurance industry promotes Economic growth and structural development by:
- Providing broader insurance coverage directly to firms while improving their financial soundness
- Championing entrepreneurial attitudes, encouraging investment, innovation, market dynamism and competition.
- offering social protection alongside the state releasing pressure on public sector finance
- Enhancing financial intermediation, creating liquidity and mobilising savings. As major institutional investors, insurers gather dispersed financial resources and channel them towards investment opportunities, facilitating companies’ access to capital.
- promoting sensible risk management by households and firms while contributing to sustainable and responsible development;
- Fostering stable consumption throughout life.
Insurance fosters investment and innovation but creating environment of greater certainty. Insurers are solid partners for the development of a workable supplementary system of social protection, particularly in the fields of retirement and health provision.
firm’s best friend
Insurance allows firms to expand and take on economic risks without the need to set aside capital and liquid emergency funds. The absence of adequate business insurance cover turns to be particularly harmful for small firms. Limited capital, and difficulty in accessing financial markets make them vulnerable to adverse events.
Without insurance, large emergency funds would be needed to protect funds against risk. For many small firms this would represent more capital than they presently employ in total. Therefore, the population of firms would decrease rapidly.
Entrepreneurs are, by definition, people who ‘take on financial risks in the hope of profit’. Insurance helps in fostering entrepreneurial attitudes, encouraging investment, innovation, market dynamism and competition in the economy. Without entrepreneurs willing to take risks, there would be no innovation and no new business.
Even if the insurance industry cannot change the overall willingness of actors in an economy to take risks, it does play a key role in freeing entrepreneurial spirit. Insurance decreases the risks supported by entrepreneurial through mitigating and pooling procedures, encouraging them to take additional risks.
Well-developed insurance market help optimize the sharing out of ‘risk taking’ by shifting it from conservative to innovative and high profit activities.
people need security
Personal consumption (essentially goods and services consumed by individuals) represents almost 80% of the GDP and constitutes one of the main drivers of economic growth and citizen welfare.
By offering lifelong financial protection, insurance acts as a security net allowing stable consumption throughout all individual’s life. By offering products relevant to all aspects of life, insurance secures a sure and steady standard of living for many people…giving them a brighter future to look forward to.
did you know? maizviziva here? ubukwazi yini?
that in Zimbabwe Life Insurance and Pension monies drive economic growth. They fund infrastructure such as houses, bridges, roads, agriculture and even banks. Most of the money that is lended to customers is from insurance and pension companies.