Advantages of Shares In Insurance

Advantages of Shares In Insurance

Advantages of shares In Insurance

(i) One of the functions of insurance companies is to invest the premiums received from the insured clients (individuals, companies, institutions, etc.). Over £500m a year goes into British insurance companies. This enormous sum is ski!-fully invested by experts (big companies can afford to attract the best brains), ensuring both a great reservoir of investment capital with continuous growth. Prudential Assurance alone has investments worth over £1,000m.

Thus, insurance companies have two sources of income, investment income and premium income, which itself contributes to the growth of investment income. The soundness of British insurance companies rests upon the fact that in the event of loss in any one department of insurance, such as fire insurance, in any year, the loss can be offset by the investment income for that year. Again, the investments of British insurance companies are worldwide, though recent experience in the U.S.A. particularly has been disappointing.

(ii)British insurance companies have more than two hundred years' experience behind them so that, from the investor's point of view, insurance forms a well-tried and proven security. On the basis of this experience and the accumulated statistics their actuaries are able to calculate with precision the rates of premiums to be charged, and the proper margin of reserve, with due regard to claims. The figures for these (premiums and margin of reserve) are constantly under review, and premiums are raised, if need be, to safeguard the reserves.

(iii)Life assurance is on the increase. More and more young people are taking out life policies, particularly in view of the fact that the rates for life assurance have remained constant whilst wages and salaries have increased. This tendency is likely to continue and increase for the following reasons: (a) the immediate large cover afforded for dependants in the event of premature death; (b) the compulsory regular saving through the premiums which carry tax rebate; (c) ability to use life assurance policies as security for loans, especially for house mortgages.

(iv)Economy in running costs by the mechanisation of accounts through computers.

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