Role of the Insurance Industry in Economic Development

What Role has the Insurance industry In Economic development? The insurance industry has come a long way from ship owners, merchants and underwriters gathering in Edward Lloyd’s coffee house in London to discuss their marine voyages to new colonies of the British Empire. Over the years, Insurance has become essential in our everyday lives. Something we just can’t live without. Our Economics and Societies are growing phenomenal rates and have become more and more interconnected on the rest of the world, the risks exposed to us become more unpredictable and hazardous.The need to protect against unfortunate events has been around as long as human beings existed. Individuals have always recognised their need to alleviate risks that have the potential to ruin the. At the dawn of modern history, widely dispersed groups of tightly knit hunter-gatherers, relied almost exclusively on clan relatedness as their only bulwark against the ever-present risk of death, debilitating inju ry and starvation.For those early ancestors, the concept of risk always existed, exclusively in terms of the physical persons of individuals, mitigated by the guarantee of personal and kin relationships, rather than objects and possessions. (Buckham et al 2011, pp. 1-9). According to Lopez and Raymond 1967, in antiquity, a sea loan was the first sign of transferring risk. A number of German and Italian jurists have regarded it as something close to insurance. It involved a ship owner promising to transport goods belonging to a merchant and at the same time providing a loan, somewhat of a guarantee.If the ship and the goods arrived safely to its intended destination, the merchant returned the loan but if they didn’t arrive safely, the loan was not returned. From its origins in ancient times, the insurance industry has evolved into an essential service in our society and a â€Å"key component for economic development† (Liedtke 2007). Our lives are progressing rapidly, th ere is a significant increase in the general population, technology and science is continuously maturing and the world is becoming smaller.The insurance industry is now faced with challenging obstacles through â€Å"the liberalisation of insurance and capital markets, changing demographics, volatile stock markets, the shifting of climate patterns and the rising numbers of natural and manmade disasters and subsequent losses† (Ayadi and O’Brien 2006). â€Å"The global risk landscape is growing and the size of potential losses is continuously increasing† (Coomber 2006). Society has progressed significantly from ancient times and our need of insurance has drastically transformed accordingly.The increasing sense of ambiguity and uncertainty in our lives regarding our future economic prosperity and the devastating impact of catastrophic events has certainly reinforced the need for insurance to shield us against new and emerging risks. This paper asks the imperative qu estion: What role has the insurance industry in our economy development? The Importance of the insurance industry for an economy can only in part be measured by the sheer size of its business, the number of its employees in a given country, the assets under management, or its contribution to the national GDP.But insurance is not just about employment and the financial compensation of Victims. It actually plays a more fundamental role in the workings of a modern society, it creates huge capital assets. Due to the nature of insurance contracts which usually involve long time periods, money coming from insurance, usually stays in the financial market of a given economy for quite some time. It is not a fickle investment capital that rushes around looking for quick gains, it is oriented toward the medium to long term. It creates a stable environment by allocating assets according to market forces where needed (Liedtke 2007).There are six main areas where the insurance industry fosters ec onomic growth. I will now go into detail on these six areas (CEA 2011). Private insurance improves firm’s financial soundness: Insurance allows firms to expand and take on economic risk without the need to set aside capital. If a firm did not have adequate business insurance cover this could be harmful particularly for small firms. Small firms have limited capital and have difficulty in accessing financial markets which make them particularly vulnerable to adverse events.Without insurance large contingency funds would have to be in place to protect firms against risk. For most small firms this would represent more capital than they presently employ which would not be viable for most small firms and this would lead to a reduction the population of firms. Fostering entrepreneurial attitudes, encouraging investment, innovation, market dynamism, and competition: To be innovative you have to take risks. Since entrepreneurs just like ordinary people are characterised by risk aversi on, the willingness to take risks can be considered a scarce resource (Kugler and Ofoghi 2005).More will be produced if greater risk is taking. Well developed insurance markets contribute to the development of an economy by helping to optimise the allocation of the scarce resource of ‘risk taking’ by moving it from a conservative to an innovative and high profits activities. On the other hand uninsured firms are very conservative and generally do not exploit new business opportunities and invest less in innovation and their degree in the global markets is low. Offering social protection alongside the state, releasing pressure on public sector:In all industrialised countries a major problem is not too far down the line. Due to improvements in healthcare and quality of life population’s structures in industrialised countries are changing where people are living a lot longer and at the same time the birth rate has also decreased. People are also expecting to receive a high level of healthcare, pensions, unemployment allowance and other social benefits. This raises great concern as public expenditure will be put under huge pressure and will lead to significant decreases in economic growth.The role of the insurance industry is vital to provide an additional pillar alongside the protection supplied by the state. Insurance products like payment protection insurance play a vital role in protecting household in times of unemployment in an economic downturn. Many industrialised countries such as the United Kingdom provide free healthcare to its citizens. In the future what we are going to see is the health system in these countries being privatised and individuals buying private health insurance. Currently 47% of the Irish population have health insurance (Nolan 2006).Similar systems will have to be introduced to the pension systems. These measures will help reduce government expenditure on these areas and in the long run help with the development of the economy in the countries. Enhancing financial intermediation, creating liquidity and mobilizing savings: Insurers are massive institutional investors in the economy with over 11% of worldwide assets in 2007 (Munich RE 2007). They therefore see benefit in the development of a modern , competitive financial market that facilities firms access to capital and offers a wide range of investment opportunities.In this respect insurance companies look favourably upon initiatives taken by governments to ensure shareholder rights and to maintain high standards of corporate governance. Promoting sensible risk management by firms and households, contributing to sustainable and responsible development: Insurers risk assessment is reflected through in price and policy conditions. In this way they offer firms and households an indicator of their level of risk. Firms and households in can take action to reduce the risk by engaging in risk management.Risk management is the process of gauging or accessing risk and developing strategies to manage it (Squiddo 2012). Therefore by means of risk pricing insurance encourages sensible risk management. Both the client and the insurer benefits from sensible risk management as the client’s premiums are reduced and the chances of the insurance company having a claim are also reduced. This process influences investment decisions and thus contributes to the development of the economy. Fosters stable consumption throughout life: Consumption is the main driver of economic growth as its accounts for over 80% of GDP.By having insurance it offers lifelong financial protection and allows stable consumption throughout an individual’s life. * Insurance for house and other damages allow individuals to secure assets in case of an adverse event. * Liability insurance covers household for damages that might occur to other people. * Life insurance protects relatives in the event of a death and also provides financial support in retirem ent. * Health and accident insurance provides cover when it is needed most. * Credit insurance eases consumption but does protect against excessive debt through pricing and acceptation policies.Another new phenomenon in the insurance industry is Micro insurance. It aims to alleviate poverty, distribute products in new ways and create sustainable financial growth for individuals, families and small scale businesses in underdeveloped countries. The need to provide insurance products is vital if their economies are to develop. People in underdeveloped countries are most at risk to adverse events and they have a significant negative impact on their lives. When a hurricane, flood or other adverse events occur and their homes are destroyed or their livestock is wiped out, these people have no financial compensation.These communities have to start from scratch. Insurance companies recognise that the poor require a range of insurance products that meet their needs. Zurich was an early mover in micro insurance, when it started its first micro insurance programme in Bolivia in 1999. It hasn’t been an easy move due to a lack of trust and confidence by people in underdeveloped countries but if these problems can be resolved there is huge potential for growth in the market and also for a dramatic improvement in economic development in these countries (Pope 2011).Conclusion: When we think of economic development, most attention is devoted to the relationship between the financial markets and economic development with insurance only receiving a passing mention. However in recent times there have been several interesting lines of research into the role the insurance industry plays in economics development. I have shown in this paper how the insurance sector plays a fundamental role in the development of our economy and without insurance we would live in a world that would be less economically developed and much less stable.Insurance supports research and development, i nnovation and new technologies, it supports economic stability and sustainable growth and also supports the sustainable use of resources and helps modernise social protections systems. The evidence suggests that there is substantial potential for the insurance industry to make a greater contribution to economic growth especially in lower and middle income countries. Currently insurance lags behind financial services in the extent of globalisation, but if we can continue to expand the insurance industry we will see substantial growth opportunities.Bibliography Ayadi, R. and O’Brien, C. (2006) â€Å"The future of insurance regulation and supervision in the EU: New developments, new challenges† Buckham, D. , Wahl, J. and Rose, S. (2011) Executive’s Guide to Solvency II, United States of America: The Wiley and SAS Business Series. Coomber, J. R. (2006) â€Å"Natural and Large Catastrophes– Changing Risk Characteristics and Challenges for the Insurance Indust ry†, The Geneva Papers, 2006, 31, (88-95) Kugler, M. and Ofoghi, R. (2005) Does insurance promote economic growth? Evidence from the U. K. University of Southampton Paper, July 2005. Liedkte, P. M. (2007) â€Å"What’s Insurance to a Modern Economy†, The Geneva Papers, 32, (211-221) Lopez, R. S. and Raymond, I. W. (1967) Medieval Trade in the Mediterranean World: Illustrative documents translated with Introductions and Notes, New York: WW Norton & Company Inc. Nolan, B. (2006) â€Å"The Interaction of the Public and Private Health Insurance: Ireland as a Case Study†, The Geneva Papers, 31 (663-649) CEA (2011) â€Å"Better off in Europe: How the EU’s single market benefits you†, available: http://ec. uropa. eu/publications/booklets/move/56/en. pdf Munich RE(2007)â€Å"The fundamental role of insurance†, available: http://www. genevaassociation. org/Portals/0/COP15_Munich_Re_presentation. pdf [accessed 25 October 2012] Pope, C. (2011) â€Å"Do we really need Private Health Insurance†, The Irish Times, 24 Jan, available: http://www. irishtimes. com/newspaper/pricewatch/2011/0124/1224288161882. html Squiddo (2012) â€Å" Principles of risk management†, available : http://www. squidoo. com/the-principles-of-risk-management [accessed 26 October 2012]

Current Events and U.S. Diplomacy Assignment Example | Topics and Well Written Essays - 1000 words

Current Events and U.S. Diplomacy - Assignment Example Though most of these relationships are positive and peaceful ones, there are some relations that are not so good. This is especially apparent with US relations with many Arab countries in the Middle East. This relationship culminated with the twin tower attacks on 9th September 2011 by Arabic terrorists, and the US response to the attacks by invading Afghanistan, and later on Iraq, in order to quash any terrorist groups intent on attacking the USA. One country whose diplomatic ties have seen developments since the cold war ended with the fall of the Berlin wall in 1989 is Germany. During the cold war, the Berlin Wall separated east and West Germany, and by extension separating Eastern and Western Europe. Therefore, Germany was in the midst of all the chaos that marked the cold war decades. The two separate parties had completely different ideologies, and this difference split Europe between those two camps, hence a physical separation in form of a wall was built to separate them. Aft er the fall of the Berlin war, most countries changed their political ideologies to those of Western Europe. Germany, which had been split into two, had difficulties settling into being one large country with Western Europe ideologies, especially concerning democratic rule. The reason for this was due to the fact that the elements that advocated for socialist and communist rule were still resisting the inevitable change that was prevailing in the country. However, in the end, the western ideologies and democracy prevailed (Stiftung, 2003). Germany’s cold relations date back to the Second World War when the two countries were indifferent camps. USA allied with Britain and other countries to end the Nazi rule in Germany and brought the Second World War to an end. After the fall of the Berlin wall, the USA was a very significant force in ensuring that peace was brokered between the two former camps of eastern and western Germany. Furthermore, the US retained a large number of it s military personnel in Germany after the end of the cold war to protect its trade, educational and other institutional interests in the country. This was, however, a friendly agreement between the two countries. When the USA invaded Afghanistan after the September 2001 attacks, Germany sent troops to back up the NATO forces in bringing down the middle eastern country, which was seen as protecting the terrorist attacks mastermind Osama bin Laden and other terrorists operating under the A Qaeda emblem. However, the relations between USA and Germany turned sour when the then German chancellor Gerhard Schroeder refused to back the USA in invading Iraq, opting for more diplomatic and peaceful solutions to the problem. This problem was neutralized when the US-backed Angela Merkel became chancellor. Recently, the relations between the USA and Germany have had tensions again after a series of secret documents from the US embassy in Germany were leaked to the public by Wiki leaks. In these documents, information passed between the US embassy in Berlin and the USA painted a bad picture of the leadership in Germany, especially of the current chancellor, labelling her names. Furthermore, the leaked information criticized nearly the whole German cabinet and leadership, with very few pro-American members left untainted (Norton, et al., 2011).

Gorbachev and the Age of Rebuilding Essay Example | Topics and Well Written Essays - 2250 words

Gorbachev and the Age of Rebuilding - Essay Example Did he really know what he was doing? Most of the radical reformists generally receive much doubt and unstable support simply because their theories have yet to be tested. It does not come as a surprise that many perceived Gorbachev was moving blind in his pursuit of reforms. But the author firmly believes that he had a clear and well equipped understanding on their position regarding what matters were needed to be reformed. Gorbachev literally grew up inside the sluggish Soviet system, thus he knew which components were hindering them from achieving good economic standing (Mcnair et al. 2005: p. 1). The West perceived him as a liberator and progressive leader with his foreign and domestic policies such as the Perestroika, which means restructuring or rebuilding, and the Glasnost which is literally translated as openness. These reforms were meant to remedy the economic deficiency of Russia and adapt better practices in the hope of making Russia a globally competitive economy. These p olicies, especially the Perestroika, received the spotlight since the USSR standard of living drastically collapsed together with the economy under his rule, and ultimately it also lead to the dissolution of the USSR. Perestroika is widely believed and argued to be also the main cause of the revolution of Eastern Europe in 1989 and also it contributed to the end of the Cold War (Heauel & Cohen 2009: p. 1). In the aftermath of these events, it is relevant to consider how Gorbachev has come up with such policies and aggressive reforms. Relevant also would be how he devised and schemed the plans to go, and how the plans later on faltered and backfired to Mother Russia despite all the good intentions and virtues that it bannered. The status quo before he came into power should also be put into consideration and also the consequences of the demise and how much should really be the attributed blame to his blunder. The policies of his predecessors, like Khruschchev, where the early stages of Perestroika was likened to his reforms during the 1950s and sixties (Tompson 1993: p. 73), should also be understood. This is necessary so as to learn how he then came to be with his political orientation and of what external factors are at play in influencing and engineering such policies. SHAPING A REFORMIST Before delving deeper into Gorbachev’s policies and reforms, one must first try to understand where he is coming from and how he came to be in power. His early life shaped how he came to be an aggressive reformist who later on became one of the most influential political figures in the XX century. Gorbachev was born into a mixed Russian-Ukrainian family on March 2, 1931 (Ikeda & Gorbachev 2005: p. 11). Early in his childhood, he experienced the Soviet famine of 1932-1933 which claimed the lives of his two sisters (Gorbachev 2006: p. 10). His family started off as poor landless peasants but later on rose to become middle-class farmers because of the Soviet collectiviz ation (Mcnair et al. 2005: p. 1). He recalls that â€Å"The peasant labor was very hard. It was back-breaking labor twenty hours a day, with no more than three or four hours of sleep. Yet it did not bring prosperity to the farmers. The only hope was the private plot of land where everything was cultivated to make ends meet somehow† (Gorbachev 1996: p. 36). It can be concluded that he is no stranger to the struggles of the lowest of classes for he experienced the

Discussion week 8 The Importance of Social Media and Web Analytics Assignment

Discussion week 8 The Importance of Social Media and Web Analytics - Assignment Example As mentioned, Salina was noted that the key ingredients to her success are: â€Å"quality content, the building and nurturing of an audience, and findability† (Robson, 2012, p. 4). Two of the social media methods that Salina used are: (1) partnering with YouTube; and (2) promoting her instructional videos through Do-It-Yourself (DIY) sites, like CutOutAndKeep (Robson, 2012, p. 3). The partnering with YouTube proved to be instrumental in enhancing awareness, access and viewership to her target audience. On the other hand, opting to promote the videos through DIY sites was deemed to be contributory to acknowledgement of her skills and talents as a craftsperson. Posting her instructional videos in these social media sites provided the opportunity for Salina to catapult to fame and to be known in the arts and crafts endeavor. 2. From the scenario, prioritize the most significant components of a social media campaign according to the level of influence each could have on the new product launch. Examine both the social media tools that will provide the highest return on investment (ROI), and two (2) key performance indicators (KPIs) that one could use to measure success. Provide a rationale for your response. From the scenario, it was noted that the most significant components of social media campaign according to the level of influence each could have on the new product launch of the tablet are: (1) word of mouth (W.O.M.); and (2) social networks. The social media tools that could provide the highest return on investment (ROI) would therefore depend on accurately identifying the goals of the marketing campaign and to ascertain how much funds or resources have been spent (amount of investment) to generate the targeted return (Developing Social Media Campaigns for the New Product Launch, 2014). Thus, to measure the ability of generating the highest

Military Technology Essay Example | Topics and Well Written Essays - 1250 words

Military Technology - Essay Example The internet and phones connect us to people who are thousands of miles away from us and have bonded people together as well as widening our view on staffs and made information even more accessible to persons. Evolution of technology has made life easier by saving lives via technological medical advances. Newer technological advances might lead to newer scientific discoveries. For instance, the developed DNA sequencing and copying technologies has led us into important breakthroughs in several areas of biology, specifically in reconstruction of evolutionary relationships amongst organisms. One might think the society is relying too much on it but that might be a good staff since that's the way our lives seems to be improving now thanks to technology (Hardy, 2002). Our everyday lives are spent surrounded by technology and technology not just being Xboxes and TVs. We heavily depend on cars, trains, and planes for transportation. The society also rely greatly on advancements in weaponry so us to keep the country safe. We spin around technology and it has enhanced our lives greatly. I think our everyday life would be miserable without evolution of technology. ... Moreover if you don’t own a recent one then it`s same as not owning one at all. With the evolution of technology, we are discovering new, and life altering ways to enhance research into many diverse fields which we use every single day. One of the most essential forms of research which with the aid of technology has assisted individuals worldwide is medical research. Devoid of the evolution of technology that the society has now, most of the treatments the society has for diseases, injuries and infections would have not been invented if the technology society has today did not exist. Human life spans would significantly be reduced, and they would not recover from diseases, injuries or infection the way they are able to now. Less harmful infections and injuries would be more serious and might not heal as they do. Diseases too would be way more deadly than they are currently (Jaeger & Bowman, 2005). A good example of how society is dependent on the current technology to assist p eople as well as make huge improvements on illnesses is evidenced in reliance on artificial limbs to make life easier. The continued funding of NASA( National Aeronautics and Space Administration), together with its combined innovations in shock-absorption and robotics materials are inspiring and allowing the private sector to generate new and better solutions to animal and human prostheses. Advancements for instance Environmental Robots Inc.’s improvement of artificial muscle systems that has actuation capabilities and robotic sensing for use in extravehicular activities and space robotic of NASA are being adapted to generate a very functionally dynamic artificial limbs. Technology also make our lives easier and that of society through improving the transport sector.

Families Essay Example | Topics and Well Written Essays - 500 words - 4

Families - Essay Example t would be fundamental for a day care provider to dedicate his efforts towards developing positive and productive relation to both children and parents. It is necessary for parents to develop comfortable zones with instructors and personnel who will be caring for their children. In other words, unless the families feel apprehension, the children will easily mirror the same emotion; thus, resulting in tearful good-byes every time the parents leave their children in a day care. If there are scenarios of discomfort, it would be extremely difficult for parents to leave their children in a day care (Cornish 86). Therefore, as a care provider it would be necessary to create a comfortable environment directed towards the parents and their children. One way of establishing and developing quick comfort zones for the children is by allowing or requesting the families to visit the facility frequently at any time during the working hours. This makes the bond between the child and the parent hold, which results to children feeling comfortable. Furthermore, the liberty of visiting the institution will make the parent feel free and not to feel that there is anything hidden from her. Additionally, visiting the day care will ensure that the families fully understands the open door policies of the institution before they get the chance of admitting their children into the facility (Cornish 86). This will be a fabulous opportunity for families to understand and apprehend a care provider’s experience and qualifications. These qualifications should sappers the minimum qualification of the care provider, so that the parent can develop confidence in a care provider. The confidence goes further to reaffirm the families that their childr en are in the position of developing positive childhood skills. Apart from qualifications, as a daycare manager, the families should also be exposed to the qualification and experience of other staff members (Cornish 87). As a daycare manager, it is

Effective Communication Skills in Healthcare Coursework

Effective Communication Skills in Healthcare - Coursework Example Patients often feel frustrated because their doctors do not apply patient-oriented communication skills which result into negative outcomes on the delivery of actual medical advice. Patients also complain of lack of important attributes of their physicians, such as empathy and kindness, which can lead to a communication gap between the two sides of the communication process (Hassali, Shafie, & Khan, 2012). It has been reported that patients’ concern on communication behaviour has positive outcomes in their level of satisfaction, and this kind of patients tend to be more submissive to treatment. On the negative side of it, poor communication skills on the part of the healthcare provider results in unsatisfied patients that reflects in the quality of the treatment and compliance to drug therapy (Lochman, 1983 as cited in Hassali, Shafie, & Khan, 2012). There are also reports that the lack of correct information results into inefficient health care, the inability of doctors and healthcare professionals to provide patients’ needs, and absence of respect and dignity of patients. On the other hand, health professionals also reported lack of skills in having good relationship with patients. According to NÃ ¸rgaard et al. (2012), healthcare providers should have positive relationships with each other, particularly in providing respect and appreciation to their peers so that they can provide respect and positive relationships with patients. There are problems that hamper the ideal patient-physician communication. Sometimes the healthcare providers have a busy schedule and need to treat many patients.