Once upon a time, an excellent chef came to a small town and opened a small restaurant there. He could cook so well that his restaurant attracted a lot of customers to dine in every night. The chef thus hired a young man as his assistant to serve the customers, so that he could whole-heartedly prepare delicious dishes in the kitchen. Since then, his restaurant became more and more prosperous.
Unfortunately, his assistant was injured accidentally in the restaurant. The chef paid the medical fee for his assistant, who was also given a paid sick leave. The assistant could still get the salary when taking rest at home. The chef tided over the difficulties because he had some savings in his pocket. The assistant went back to the workplace soon after he recovered. The restaurant also resumed its prosperity as the days before. Then, the chef planned to expand his restaurant and to hire a few more staff, so that he could train more people to become an outstanding chef.
However, another trouble came to this town later. This time, an employee in another shop got hurt in an accident during work. But, he was not as lucky as the chef’s assistant. His boss did not have enough money to pay him for compensation, and not even able to support for his medical fee. The boss was also the victim in this accident, as he almost went bankrupt because of this accident. The family of the injured employee came to the Mayor for the claim of compensation. The Mayor spent a lot of efforts to settle this dispute. Henceforth, the Mayor decided that all business owners had to keep a sum of money as “guarantee money”. This policy was made to ensure that the employee, who suffered from work injury, could get a reasonable compensation.
All business owners in the town started to look for money as “guarantee money” after hearing this news. For those who were unable to keep the “guarantee money” had to dismiss the employees. No one dared to open new headcounts anymore. Suddenly, the town started to suffer an economical depression. The business of the chef’s restaurant also unavoidably got a hard hit. Even though the chef earned enough for his living, it was still difficult for him to expand his business because hiring new employees required to keep extra “guarantee money”.
Everyone was wearing a sad face in the town. A man in suit with a suitcase arrived there and saw the situation. He tried to find out what’s going on… “Oh! I got it!” He proposed a solution after understanding the case immediately: every business owner could just pay a certain amount to a financially strong company, then that company would assure that every injured employee could get the compensation.
With this arrangement, all employees in the town were guaranteed to have compensation, while all business owners would never be afraid to go bankrupt because of the possible huge amount of compensation. The companies could then use their capital more freely to hire new staff and expand their business, as they did not need to reserve the money anymore. The chef could now continue to expand his business and to create some new job opportunities. The Mayor could stay away from the troubles, but he had the obligation to monitor the financial situation of the company holding the “guarantee money” for the people regularly.
This story is fictitious. My original story may be a bit too imaginative and exaggerated. But, I would like to explain how insurance contribute to individuals, as well as to the whole society.
1. Our own saving is also our insurance. It can protect us when we have any problem or accident.
2. All the employers are obliged to take out employees’ compensation insurance policy for all employees. It is to ensure all employees could get the compensation if they were injured because of their works.
3. Insurance can promote the economic development and create working opportunities. The transfer of risks to insurance company can be considered as a better management of our capital/ saving, so that the small business can better utilize their resources for the expansion of business.