When we think of insurance, we typically think about financial protection for ourselves and our loved ones, and that is true. Insurance protects you or your family financially if something unexpected were to happen. But, insurance plays a much bigger role than just insuring individual households. In fact, it plays a vital role in the economy.
How has insurance affected the economy?
Provide Safety and Security
Everyone knows that insurance provides financial support and depending on your insurance coverage, it covers you for any sudden losses and relieves you of some financial burden. All in all, insurance provides a safety net for people to fall back to if they suffered any losses.
Allows Entrepreneurs and Investors to Take Risk
Insurance allows brilliant innovators and aspiring entrepreneurs to safely take risks that drive the modern economy. Without the guarantee of insurance, most businesses could not operate as they do today, and construction projects could not go forward without risking financial losses and not receiving any compensation for it. Insurance allows young and independent entrepreneurs to pursue risky yet innovative ideas confidently, creating a progressive society in the progress.
Insurance Promotes Saving
One of the main roles of insurance is that it encourages people to save. Insurance such as life insurance enables people to make systematic savings due to payment of regular premiums. This, of course, helps cultivate the habit of saving and managing money among those who are insured and more importantly, it protects them from financial losses. Besides, they get the lump sum amount once the contract is matured which means you are getting back the total amount of premium you paid, plus the additional interest compiled! So naturally, people are encouraged to save thus avoiding poor financial management.
Cover for Medical Expenses
Medical insurance is considered essential in managing risk in health. Anyone can be a victim of critical illness and according to a survey, 1 in every 4 to 5 Singaporeans may be at risk of contracting cancer in their lifetime. The cost of treating cancer could be as high as $100,000 to $200,000 per year in the later stages of cancer, and that’s not including the other expenses such as medications, supplements, utility bills, etc. Medical insurance is arguably one of the most important insurance plans that helps bear the financial burden of costly medical bills. For a society to progress forward, a healthy workforce that is well-insured against any form of critical illness is important.
Insurance Builds the Nation
In 2019, the finance and insurance sector made up 13.9% of Singapore’s GDP, which is the 4th largest sector to contribute to the country’s growth—that’s a whopping 66.7 billion Singapore dollar! Naturally, you can expect that the money is utilised to accelerate the economic growth of the country such as investing in government bonds, financing public works and helping to support the local and state government. In fact, the financial industry has collaborated with the Monetary Authority of Singapore (MAS) to help ease the financial burden of Singaporeans through various stimulus packages and loans to weather out the Covid-19 pandemic, thus, reducing the burden on the government and allowing them to utilise the taxpayer’s money (your money) on other parts of the economy.
Enforcers of Social Policies
The insurance industry is a key player in social policy. This is because insurers are the financial first responders of any misfortunes as they raise key issues faced by society. As an example, the Ministry of Health (MOH) has recently launched CareShield Life for Singaporeans aged 30 to 40, a national long-term care insurance scheme that provides basic financial support should Singaporeans become severely disabled. According to MOH, 1 in 2 healthy Singaporeans at the age of 65 could become severely disabled in their lifetime and may need long-term care.
Furthermore, insurance policies help prevent exploitation in society. Under the Work Insurance Compensation Act (WICA), it is compulsory for employers to buy workers’ compensation insurance for their employees, as failing to do so would result in a fine of up to $10,000 or jail of up to 12 months, or both. Under this act, employees with work-related injuries or diseases are eligible for a compensation claim without having them to file a civil suit under common law.
Provide Job Opportunities
As of 2019, the insurance sector employs more than 40,000 professionals. The Life Insurance sector, on the other hand, recorded a number of 8,309 employees which was a 9.4% increase from 2018. By providing ample job opportunities through sustainable growth, the insurance sector has indirectly lowered unemployment rates and allowed for the creation of job opportunities.
The role of insurance is vital to a healthy and stable economy. If you’re reading this and would like to contribute to the growth of our nation, join us now!