Insurance companies, consisting of life and non-life institutions, are also important financial intermediaries in any economy. Their main functions are:
- Mobilising relatively long-term funds in the form of premiums from policy holders thereby, promoting savings in the economy.
- Investing their funds in bonds, stocks, mortgages and government securities, in the process, contributing to effective utilization of scarce investible resources.
- Providing palliatives in the form of `claims` where a policy holder suffers a loss. Hence, they encourage asset acquisition and facilitate the growth of commerce and industry.