Insurance and Takaful has become an integral aspect of not just an economy but everyone's life today. While often being underrated, the importance of Insurance & Takaful and their roles in macro-economy is vital for a sustainable economy growth. In fact, the history of insurance may be dated as far back as 11th century - the Guild Protection (similar to today's group coverage). However complex technicality and jargon used in insurance terms have often been the barrier for general public to fully understand the ecosystem of insurance.
The following shows few examples of how insurance can be vital for everyone.
Provide Safety and Security Insurance provides financial support and reduce uncertainties for business / individual / society against particular event or disaster. For example, Disaster Risk Financing is catered especially for countries that is often hit by natural disaster. Think of Motor Insurance, even in it's most fundamental Third-Party Motor Coverage, would protect the insured motorist against the liability of repayment in case of a motor accident.
Economic Growth Insurance company may also be seen as a fund manager ; where funds are generated by collecting premium. Some of these funds may be employed in industrial development and in turn geared the economic development of a country. These developments would translate into increasing business and employment opportunities.
Encourages Financial Savings While transferring / spreading risk is insurance's fundamental concept, it could also be an investment channel. Life insurance and family takaful product required policyholder to systematically make payment in the form of regular premium (which at the maturity of the contract, the insured will be repaid in a lump sum accordingly), this in-turn would develop savings habit.
Welfare of Employee Welfare of an employee is the responsibilities of employer. Therefore, the latter has to look after the welfare of the former which can be provision for early death, provision for disability and provision for old age. These requirements are easily met by the life insurance, accident and sickness benefit and pensions which are generally provided by group insurance. The premium for group insurance is generally paid by the employer. This plan is the cheapest form of insurance for employers to fulfill their responsibilities. The employees will devote their maximum capacities to complete their jobs when they are assured of the above benefits. The struggle and strife between employees and employer can be minimized easily with the help of such schemes.