ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Insurance companies have three options for protecting against adverse selection, including accurately identifying risk factors, having a system for verifying information, and placing caps on coverage.

Detailed explanation-2: -Examples of nonbank financial institutions include insurance firms, venture capitalists, currency exchanges, some microloan organizations, and pawn shops.

Detailed explanation-3: -Insurance turn accumulated capital into productive investments. Insurance also enables mitigation of losses, financial stability and promotes trade and commerce activities those results into sustainable economic growth and development. Thus, insurance plays a crucial role in the sustainable growth of an economy.

Detailed explanation-4: -Most insurance companies generate revenue in two ways: Charging premiums in exchange for insurance coverage, then reinvesting those premiums into other interest-generating assets. Like all private businesses, insurance companies try to market effectively and minimize administrative costs.