There are elements of kindness in Insurance. Insured and insurer both deserve for good fortune. Insurance protects an individual right from his/her from birth, to death. Insurance is the biggest gift to the modern human society. Importance of insurance is not only limited to an individual or family, but it is widespread for the development of a nation. Use of insurance is increasing in modem time. Insurance not only fulfills the requirement of an individual or a group of people, but it is also helpful in development and growth of a society by providing security.

It is not only the mixture of principle of insurance and techniques, but also a mix of personal and group benefits. It helps in growth of a nation and society by its huge network and by encouraging savings. Therefore, it is clear that insurance is important for an individual and for the society. Prof. Dinsally defines, “No one can live without insurance in modern world.” Today, insurance is the lifeline of the modern society.

Economic Significance of Insurance : 

(i) Protection from risk : 

A business is exposed to several risks. There can be risk of theft, damage, etc. to property, goods and profit, from natural calamities, by sea perils, by fire, by negligence of human beings, etc. Insurance provides protection from various risks by indemnifying the insured businessmen against the losses due to the specified event. 

(ii) Protection to business due to sudden death of the key person : 

The successful operation and development of business largely depends on its directors, managers and administrative personnel. Sudden death of a key person badly affects the functioning of the business. Insurance plays an important role by insuring the life of the key person in the business, so that the future of business can be protected from uncertainties. 

(iii) Increase credit worthiness : 

Insurance extends credit to industrial and commercial institutions. An entrepreneur gets insurance for his business unit, plant and machinery or permanent assets purchased by him and can get credit easily. 

(iv) Increases business and industrial efficiency :

 Insurance provides protection from various kinds of risks and financial security against losses. This reduces the fears and worries of businessmen and promotes mental peace. Therefore, the efficient management of business activities becomes possible. Similarly, by taking group insurance policy for employees and by taking policy of assets, businessmen can claim compensation from the insurance company. All this helps in enhancing the efficiency of business. 

(v) Protects the interests of employees : 

Insurance provides protection to employees also, because in case of business losses, they will also be adversely affected. They can loose their jobs or can be deprived of various benefits like gratuity, bonus, pension, etc. The employer can take different types of insurance policies to protect the interest of the workers and employees. 

(vi) Promotes foreign trade : 

Import and export trade is usually affected by marine perils, failure to receive payment from foreign buyers and other losses. Insurance helps in the development of foreign trade by settling insurance claims against losses of ships, cargo, vessel freight and other related risks and uncertainties. 

(vii) Reduces cost : 

Insurance enables a manufacturer to sell the product at lower price because through insurance he is able to cover many risks of production in exchange for a small premium. In the absence of insurance plans, the business has to bear risks of different nature like fire, riots, strikes, dacoity, explosion, theft, accidents, natural calamities, marine losses, etc. All these types of risks are covered by insurance. 

(viii) Financial assistance to industries : 

All the insurance organisations provide long-term and short-term capital to commerical and industrial organisations. Insurance companies also extend credit facilities to those financial institutions that provide longterm credit to business organisations. Therefore, we can say that insurance directly assists in establishment and development of industries. 

(ix) Underwriting of shares and debentures : 

Insurance companies undertake underwriting of new issue of shares and debentures of newly-formed public companies. By subscribing to the shares and debentures of newly-formed companies, they resolve their problem of finance and capital. 

(x) Contribution in management : 

The insurance companies hold the right to appoint an efficient and effective person as a director in the board of directors of that business organisation which has taken loan from insurance companies. This not only protects the interest of insurance companies, but it also helps in keeping the management of business house very strong and dynamic. 

(xi) Contribution to the development of stock market : 

Investment in stock market securities by the insurance companies has been helpful in creating and promoting good investment avenues in the country. They not only invest in shares and debentures, but also accept private placement offers, thus making direct investment in the securities issued by industries and business organisations.

Social Significance of Insurance : 

• Safety and security of the family : 

Insurance brings stability in life of people in the society. The death of the bread earner of a family can disturb and destruct the lives of his dependents. Life insurance not only provides financial security and safety to a person, but also protects the family from disintegration. 

• Distribution of risk : 

Insurance distributes the risk of a person among a large number of people. That is why it is considered to be a cooperative device of bearing the risks collectively. In words of Riegel & William, “Insurance represents the highest degree of cooperation for mutual benefits”.

•  Prevention of social evils : 

Lack of education and economic evils like unemployment induce people to get into evils like theft, dacoity, prostitution and other social evils. Insurance helps a person and his family to become self-sufficient economically by providing coverage against life and property.

•  Signifies developed culture : 

Insurance signifies progressive and developed social culture. The countries without insurance are said to be the backward ones.

•  Improves standard of living of people : 

Insurance is a means of earning and savings, investment and transferring the risk. Insurance helps a person to become economically self-sufficient, strong, relieved from economic worries by insuring against risk and by providing direct employment to large number of people. 

•  Awareness towards health : 

By the method of publicity, insurance creates awareness among the people about the need of medical investigations, prevention of diseases, self precautions and maintaining good health. While taking health insurance policy, medical checkup is compulsory and it proves to be of importance for the insured. 

• Promotes education : 

Insurance facilitates and encourages educational opportunities in the society. Insurance companies support education for children. They encourage higher education by providing the facility of educational loan. 

• Development of employment opportunities : 

Insurance companies provide employment to large number of people directly and indirectly. Thousand of people are working in insurance companies as development officers, branch managers, agents, clerks, etc. More than 85,000 people are employed in GIC and 1,50,000 people in LIC. Number of agents working in government and private agencies is in lakhs.

•  Fulfillment of social responsibility: 

Each person in a society has a responsibility towards other people in different roles for example, a father has responsibility towards his family, employer towards his workers, producer towards customers, etc. Insurance helps the people in the society to successfully meet their economic liabilities and social responsibilities. 

•  Helps in implementation of social responsibility :

 Through insurance, the plans of social security of poor and backward sections of society can be implemented and enforced. In our country, government has started many plans beneficial for societies. These schemes and plans ensure social security to weaker and backward sections of societies. 

For example: 

Pradhan Mantri Jeevan Jyoti Beema Yojana, Atal Pension Yojana, Pradhan Mantri Suraksha Beema Yojana. 

•  Economic Independence : 

Insurance helps the society in becoming economically independent. By pooling small savings of the insured and distributing the losses of the huge risk among many, insurance makes all the people in society economically self-reliant. 

• A means of social change : 

Insurance is an important means of social change. Supporting this statement, Mehr & Cammack have aptly said, “Insurance can be an important means of social change. It is a measure of bringing important change in the mind sets, standard of living, lifestyle, etc. of the people in society.” .