2. Optimum Allocation of Resources

Optimum Allocation of Resources: 

There are some enterprises which involve risks of fire, loss of goods in trainsit and are open to burglary, robbery, theft etc. If the businessmen are not able to buy the fire insurance or marine insurance or theft insurance, the resources of the country will not be invested to these enterprises which are exposed to risk. The insurance companies by giving coverage to the risky enterprises divert the resources to the risky business and creat competition among the producers. Thus diverting the resources to risky business, brings about the optimum, use of the scarce resources to the country.