Date Posted: 11/4/2012 9:34:36 PM
Posted By: Mrs kihara Membership Level: Silver Total Points: 543
The importance of insurance to an individual and the country at large,cannot be underestimated.It plays a significant role in a country's economic growth and offers financial protection to an individual or firm against monetary losses suffered from unforeseen circumstances.This is because the world is characterized by risks and uncertainties and insurance has evolved as a way of providing security against these risks and uncertainties.What is a risk? A risk is a condition in which loss is possible.The concept of risk revolves around there being some doubt about the future(uncertainty). Uncertainty exists even when the person exposed to the risk doesn't know of its existence.Insurance operates in a simple way. The insured transfers the risk to an insurance company by paying premiums.Premiums are the fees paid to an insurance company in exchange of an insurance cover.The insurance company gathers people who want insurance protection,collects premiums and creates a pool of funds,which it manages.It will then pay the unfortunate few using the funds of the fortunate many.Below are some of the advantages of having an insurance cover.a)Peace of mind. One carries out his/her daily activities with the knowledge that in case of a loss,the insurance company will meet the financial consequences of that loss.b)Job creation and retention.The insurance industry employs a lot of people e.g.sales agents,loss assessors etc. Also,jobs are created when investors inject money into the economy knowing they will be compensated in case of a loss.In case of a loss,jobs are retained when insurance compensates the insured.c)Saving. There are insurance policies that encourage people to save through long term assurances.d)Pensions and annuities.They provide income during old age.e)On life assurance,cash lump sum paid in case of premature death alleviates the financial suffering of the dependents. What are the challenges the insurance industry is facing in Kenya?a)Some cultural practices and beliefs which are not in tune with the current economic realities.b)Poor economic growth.This has led to high poverty levels hence low purchasing power.c)Lack of knowledge and appreciation of the role of insurance by the public.d) Ignorance. Many people don't think insurance is beneficial to them.e)Negative image of the industry caused by unethical practices by some agents and other market players.
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