Role of Insurance in Economic Development

There are a number of ways that insurance contributes to the economic development of a country. In fact the role of insurance in economic development cannot be underestimated.

1) Investments from savings: Life insurance policies are major instruments for mobilization of savings of people.The life insurance companies provide insurance for all income groups of people. Some proportion of the premium is invested into investments that  accelerate economic growth. This happens because investments made by insurance companies are not speculative in nature, but are invested for the overall benefit of society.

2) Engine of growth:  Insurance provides indemnity for losses caused by accidents or fortuitous events to the insured. Insurance is provided for individuals and their families, corporate and industries and for commerce. As a consequence, insurance protects the capital and this capital is made available for future consumption by individuals and for  development of business and industry.

3)  Loss minimization: Insurance provides indemnity against loss in value of capital invested. This encourages investment of capital in business. Existing resources are used more efficiently as records have to be maintained and loss minimization measures are implemented, as these are required by insurance companies.

4) Foreign exchange: Insurance operations in foreign countries earn foreign exchange. They are also like intangible exports. and can rank with export trade, shipping and banking services as earner of foreign exchange for the country.

5) Economic equality: Rural insurance and the obligations of insurance companies to the rural sector are important for the growth of the rural economy. This provides an avenue for the rural sector to develop. Documentation becomes enabled in the rural sector as banks and insurance companies collect documents to provide insurance. Economic efficiency speeds up due to mitigation of losses as indemnity is provided by the insurance companies.

Functions of an Asset Management Company

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The two functions of an Asset Management Company are Investment and Marketing. Asset Management Companies are formed according to the rules and regulations of the Securities board of the country under consideration. Theses rules and regulations stipulate all the investment restrictions and also provide guidelines about individual and aggregate investments.

INVESTMENTS: Investments is one of the specialized functions of an Asset Management Company. The investment funds are handled by a fund manager. Sizes of schemes are not too large. A single fund manager handles many funds simultaneously. A fund managers expertise and experience in investment determines how much he can handle. Some fund types like the bank sponsored fund constitute committees to handle the investment exercise. These committees are called as 'Investment Committees' or 'Market Operation Committees'. Under this situation, it is not a single individual, but a committee that handles investment.
Another important role is played by the research and planning cell. The types of securities as well as the prospective investors are considered. Original research is important for the functioning of an Asset Management Company. The company may opt to appoint a 'dealer' to execute the purchase and sale transactions in the money or capital market. This is because the 'dealer' has an in depth understanding of stock market operations.

MARKETING: The marketing department seeks permission to market a product or a 'new scheme' from the Finance Ministry or the Central Bank or the Approved Securities board of the country. The Marketing division appoints a Registrar to the issue. The Marketing department also appoints the lead Manager and Manager to the issue. The other appointments include Solicitors, Auditors, Custodians and Transfer Agents. The department also authorizes the bankers to issue and accept applications.
Once the scheme has been approved, the marketing division is responsible for the printing of application forms, terms and conditions document. The department is also responsible for maintaining banking statements, stationary to issue certificates and refund orders as and when necessary and so on. A 'marketing scheme' or 'advertising scheme' is also designed by the Marketing department. Identification of market segment is another crucial function of this department.

Mutual Funds handle small investor's hard earned money. These investors are likely to be associated with the company for a longer time. Therefore, services after the issue of the unit certificate are important to ensure customer satisfaction.