Study 2- Insurance Categories & Functions - Functions of Insurance

Question 1

What are some Secondary Functions of Insurance that enhance the economy?

Answer 1

1. Aiding Security
2. Aiding Credit
3. Promoting loss prevention
4. Providing capital
5. Providing employment

Question 2

Aid Security

Answer 2

Insurance gives peace of mind by substituting a certain premium payment in place of an uncertain loss payment

Enhancing the feeling of security by removing uncertainty allows for many actions that are critical to society (like property ownership and entrepreneurship)

Question 3

Aid to Credit

Answer 3

It is virtually impossible to obtain credit without having insurance on the item concerned

Question 4

Loss Prevention Activities

Answer 4

1. Fire prevention
2. Safe driving
3. Antitheft protection
4. Hail-suppression programs

Question 5

Fire Prevention

Answer 5

Research and recommendations to prevent fires and reduce the spread of fires, improve building materials, and promote sprinklers and various types of fire and smoke detectors

Question 6

Safe Driving

Answer 6

Campaigns to encourage safe driving and also reward safe drivers through lower insurance costs, testing vehicles for safety, pressure on vehicle manufacturers and legislators for safety features such as automatic emergency braking in vehicles and the use of telematics to provide premium discounts to insureds for safe driving

Question 7

Antitheft Protection

Answer 7

insurers supporting the use of antitheft devices on cars, such as alarms, and vehicle tracking systems, which reduce the risk or car theft

Question 8

Hail-suppression Programs

Answer 8

The Alberta Severe Weather Management Society (ASWMS), a non-profit organization established by insurance companies, running a yearly hail-suppression program by flying weeding planes between June and mid-September to mitigate the amount of hail damage affecting urban property

Question 9

Source of Capital

Answer 9

Insurers are a source of capital because they must safeguard the premiums they collect so that funds are available to pay claims and reimburse insureds who cancel their policies midterm.
As a result, insurers have large amounts of money to invest in the Canadian economy, in bonds and stocks and certain other securities, and in buildings and land

Question 10

Loss Reserve

Answer 10

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