Economics » Financial Institutions » Types and Functions of Financial Institutions

Insurance Companies

Insurance companies, consisting of life and non-life institutions, are also important financial intermediaries in any economy. Their main functions are:

  1. Mobilising relatively long-term funds in the form of premiums from policy holders thereby, promoting savings in the economy.
  2. Investing their funds in bonds, stocks, mortgages and government securities, in the process, contributing to effective utilization of scarce investible resources.
  3. 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.

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