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The short-term low premium general insurance contracts do not result into large pool of funds for investment in assets as in the case of life insurance. As a matter of fact, general insurance companies do not collect savings, the insurance premium being more in the nature of a fee, yet these fees collect into fairly big corpus of funds which need to be invested. The ICs then meet claims under their policies from premium and investment income. As the claims under general insurance policies are uncertain and unforeseen, their liabilites are short-term in nature. Hence the investments have to be made in relatively liquid securities. In developing economies like ours, the rates of inflation are generally high leading to higher costs of repairs and replacements. Thus, the ICs doing general insurance need to have both greater liquidity and higher return and their investments reflect this need. The policies in the general branch rarely run for a period longer than one year, and in some cases the period is even shorter. Once the period is over, a brand new contract of insurance has to be entered into. There can no guarantee of renewal of policy on the same terms, though discounts are often offered based on the track record of the beneficiary. The general insurance business in India is run by General Insurance Corporation of India.
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