Functions of Insurance:

a. Diffusion of risk: Insurance may not be able to avoid uncertainties associated with life in general and business in particular.

b. Encouragement of savings: Insurance not only provides protection against risks but also a number of other incentives which encourage people to insure.

c. Prevention of losses: Insurance companies’ help in prevention of losses, as they join hands with those institutions with are engaged in loss-prevention measures.

d. Taking care of social problems: One of the important functions of insurance is to provide solution to social problems.

e. Providing capital or funds for investment: Insurance provides not only protection but also capital to the society. Usually, accumulated funds through savings in the form of insurance premium are invested in economic development plans or productivity projects.

f. Providing protection: The main function of insurcen is to provides protection against the risk of loss. The insurance policy covers the risk of loss.

g. Promotion efficiency and motivation: Insurance has contributed a greatly in the advancement of industry and trade. The largescale industrial and commercial orgaisations that exist today are the result of various services provided by insurance companies.