Learning Outcome 3

Question 1

Explain the need for insurance

Answer 1

Insurance is essential for peace of mind and to act as a risk transfer mechanism.

Question 2

Explain the basis of insurance as a risk transfer mechanism

Answer 2

That is to transfer a risk from one person, the insured, to another, the insurer.

Question 3

Describe the how insurance benefits policyholders and society in general

Answer 3

• Releases capital within companies that can be used within business.
• Businesses are encouraged to start or expand.
• Employees are kept in work
• Losses are reduced in size and number
• Insurance companies are big investors
• Invisible exports