Role of Insurance in Economic Growth and Inclusiveness – the case of India

Abstract

A B S T R A C T Indian economy has witnessed a turning point from the traditional low growth to the modern high growth since 1980's. The changing growth rates of GDP have impact on saving. In most of the life policies elements of saving predominates. With traditional forms of life insurance, the savings element is considered a by-product of the level premium method of payment. With universal life and some other newer policy forms, the savings element is often considered as a more independent part of the policy, specifically designed to build a savings fund. The policy reserve (a liability for the insurer) is considered as a fund held on behalf of an individual policy owner. Economists and marketing personnel tend to view a level premium whole life contract as a divisible contract providing financial protection to the policy owners beneficiaries, with other contract benefits available, including cash surrender and loan values arising from the mandatory premium contributions, hence the need for this study. This paper analyses the trend in GDP growth rates and its impact on saving. It studies changes in the financial saving as composition of the total saving and changes in savings with life insurance as a composition of financial savings. The paper by studying the percentage of insured population to total population evaluates the extent of inclusiveness, as it is one of the major social security tools available for the population in the absence of other social security benefits available from the government agencies.