QS Study

Insurance is able to Curtail Inflation – 

Insurance has evolved as a process of safeguarding the interest of people from loss and uncertainty. It may be described as a social device to reduce or eliminate the risk of loss to life and property.

The insurance reduces the inflationary resource in two ways. First, by extracting money in supply to the amount of premium collected and secondly, by providing sufficient funds for production narrow down the inflationary gap. As we know the two main causes of inflation are increased money in supply and decreased production in supply. Through collecting of insurance premium of the policy, insurance reduces money in supply and provide a loan to their policyholder enhancing production supply in the market so that it can curtail inflation. Insurance inflation protection is designed to allow policyholders to make sure that the benefits they receive can keep up with the inflation rate.

So, it is right that insurance is able to curtail inflation, however, whether or not that means it should be made obligatory is a matter of personal estimation. Many economists believe it should be required.

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