Do you agree to the proposition that life insurance in addition to being a provision for the benefit of an individual and his family also acts as a social and economic welfare product? Elucidate.

The immediate effect of a life policy taken by an individual accrues to the beneficiary on the death of the insured. The beneficiary could be the spouse, the members of the family or even partners or company in case of key man policies. These claims available to the beneficiaries on the death of the insured help to meet the priority needs of such people like marriage expenses, education expenses of the children or even day to day needs of the family so that the society as a whole gets indirectly benefits of such payments. Besides the above, the life insurance companies have a big role to play. The Life insurance companies which collect the savings of a person and convert into wealth. The functions of life insurance company helping social and economic welfare of the nation may be discussed as Under: (a) Saving Institution: Life Insurance companies both promote and mobilize savings in the country. The exemption provided to the tax payers under the income tax laws provide further incentive to higher income persons to save through life insurance policies. The total volume of insurance business has been growing with the awareness of the insurance benefits and this has been resulting in more savings in the nation and consequent creation of wealth. (b) Term Lending Institution: Life Insurance companies also function as a large term financing institution in the country. The annual net accrual of investible funds from life insurance business (after making all kinds of payments and liabilities to the policy holders) and net income from investments are quite large. These are used in term lending to the corporate borrowers of the industry and these help in growth of the industry in the country. (c) Investment Institutions: Life Insurance companies including LIC of India are big investor of funds in the government sector. Under the law the life insurance companies including LIC of India are required to invest certain percentage of their accruals in government and other approved securities. These life insurance companies also make funds available to the private sector through investment in shares, debentures and loans. LIC of India also plays a significant role in developing the business of underwriting of new issues. The International Association of Insurance Supervisors (IAIS) noted that by investing in bonds and other securities issued by financial institutions, insurance companies provide "an important contribution to the financial soundness of banks and more broadly to financial stability. In a similar fashion insurers are also allocating capital to the real economy by purchasing debt securities of industrial companies or through real estate investments." (d) Stabiliser in the share market: LIC acts as a downward stabilizer in the share market. The continuous inflow of new funds enables LIC to buy in the share market when the market is weak. However LIC does not sell in the market when the market is high as it needs to always keep investing in the high inflow of funds. (e) Biggest employers in the economy: Life Insurance companies are one of the biggest employers. They employ large number of staff for their day to day operations. In addition to the staff they also provide employment to intermediaries like agents, brokers, sub brokers and other outsourcing companies who take care of some of their operations outside their offices. (e) Expanding business: Whether businesses are launching a new product, signing a new sales contract or purchasing a new company, the business needs assurances that the other party is conducting business in good faith. Insurance provides the necessary protection, in case business doesn't proceed as planned. Likewise, businesses would be reluctant to hire new employees if not for workers' compensation insurance, which protects the employer while providing the employee with income when an accident temporarily puts the employee out of work.