Insurance plays a crucial role in financial risk management, making it a popular topic in IELTS Writing Task 2. Based on recent trends and past exams, this subject is likely to appear in future tests, especially given its relevance to global economic concerns. Let’s examine a typical question on this theme and analyze sample essays for different band scores.
Some people believe that insurance companies are essential for the economy, while others argue that they have a negative impact. Discuss both views and give your own opinion.
Analyzing the Question
This question requires candidates to:
- Discuss the positive impact of insurance companies on the economy
- Explore the potential negative effects of insurance companies
- Provide a personal opinion on the overall impact
Let’s look at sample essays for different band scores, starting with a high-scoring response.
Sample Essay 1 (Band 8-9)
Insurance companies play a significant role in modern economies, with proponents highlighting their positive contributions while critics argue they have detrimental effects. This essay will examine both perspectives before presenting my own view on the matter.
Those who support insurance companies argue that they provide essential financial protection for individuals and businesses. By pooling risk across a large number of policyholders, insurers create a safety net that can prevent catastrophic financial losses in the event of unforeseen circumstances. This stability allows people to take calculated risks, such as starting businesses or investing in property, which drives economic growth. Moreover, insurance companies are major institutional investors, channeling premiums into various financial instruments that support economic development and importance of liquidity for market stability.
On the other hand, critics argue that insurance companies can have negative impacts on the economy. They contend that the profit-driven nature of these firms can lead to exploitative practices, such as denying legitimate claims or charging exorbitant premiums. This behavior can erode trust in the financial system and potentially discourage economic activity. Additionally, some argue that the presence of insurance can lead to moral hazard, where individuals or businesses take unnecessary risks because they feel protected, potentially leading to economic inefficiencies.
In my opinion, while insurance companies are not without flaws, their positive contributions to economic stability and growth outweigh the potential drawbacks. The key lies in effective regulation to prevent abusive practices while allowing insurers to fulfill their essential role in risk management. By providing a foundation of financial security, insurance companies enable economic progress and innovation that benefit society as a whole.
In conclusion, insurance companies are vital components of a healthy economy, despite some valid concerns about their operations. Their ability to mitigate financial risks and facilitate economic activity makes them indispensable in today’s complex financial landscape.
Essay Analysis
This essay demonstrates excellence in several key areas:
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Task Achievement: The essay fully addresses all parts of the task, discussing both views and providing a clear personal opinion.
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Coherence and Cohesion: Ideas are logically organized with clear progression throughout the essay. Paragraphing is appropriate and effective.
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Lexical Resource: A wide range of vocabulary is used with full flexibility and precision. The essay showcases sophisticated word choices such as “pooling risk,” “catastrophic financial losses,” and “moral hazard.”
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Grammatical Range and Accuracy: The essay uses a wide range of structures with full flexibility and accuracy. Complex sentences are used effectively, and there are no noticeable errors.
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Critical Thinking: The essay demonstrates a nuanced understanding of the topic, acknowledging both the benefits and potential drawbacks of insurance companies.
Sample Essay 2 (Band 6-7)
Insurance companies are an important part of the economy, but some people think they have negative effects. In this essay, I will discuss both sides of this issue and give my opinion.
On the positive side, insurance companies help protect people and businesses from financial problems. When something bad happens, like a car accident or a fire, insurance can pay for the damages. This means people don’t lose all their money when accidents happen. Also, insurance companies invest a lot of money in different parts of the economy, which can help it grow.
However, some people argue that insurance companies can be bad for the economy. They say that these companies sometimes refuse to pay claims or charge too much money for their services. This can make people angry and not trust the financial system. Another problem is that when people have insurance, they might take more risks because they feel protected, which could cause more accidents.
In my opinion, insurance companies are more helpful than harmful to the economy. They provide an important service by protecting people from big financial losses. However, I think there should be stricter rules to make sure insurance companies treat their customers fairly.
To conclude, while insurance companies have some problems, they play a necessary role in keeping the economy stable and helping it grow. The government should work to fix the negative aspects while keeping the benefits of insurance.
Essay Analysis
This essay demonstrates good qualities but has room for improvement:
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Task Achievement: The essay addresses all parts of the task, but the ideas could be more fully developed.
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Coherence and Cohesion: The essay is generally well-organized, but the use of cohesive devices is somewhat mechanical.
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Lexical Resource: There is a good range of vocabulary, but some repetition and lack of precision in word choice.
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Grammatical Range and Accuracy: A mix of simple and complex sentence structures is used, with some errors that do not impede communication.
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Critical Thinking: The essay shows a basic understanding of the issue but lacks the depth and nuance of the higher band essay.
Key Vocabulary to Remember
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Risk management (noun) – /rɪsk ˈmænɪdʒmənt/ – The process of identifying, assessing and controlling threats to an organization’s capital and earnings.
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Financial stability (noun phrase) – /faɪˈnænʃəl stəˈbɪləti/ – The condition in which the financial system can withstand shocks without major disruption.
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Catastrophic (adjective) – /kætəˈstrɒfɪk/ – Involving or causing sudden great damage or suffering.
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Moral hazard (noun phrase) – /ˈmɒrəl ˈhæzəd/ – A situation where an individual has an incentive to increase their exposure to risk because they do not bear the full costs of that risk.
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Exorbitant (adjective) – /ɪɡˈzɔːbɪtənt/ – Unreasonably high (of a price or amount charged).
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Institutional investor (noun phrase) – /ˌɪnstɪˈtjuːʃənl ɪnˈvestə/ – An organization that invests on behalf of its members.
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Exploitative (adjective) – /ɪkˈsplɔɪtətɪv/ – Making use of a situation or treating others unfairly in order to gain an advantage or benefit.
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Mitigation (noun) – /ˌmɪtɪˈɡeɪʃn/ – The action of reducing the severity, seriousness, or painfulness of something.
These vocabulary items are crucial for discussing the role of insurance companies in economy and their impact on financial stability.
Conclusion
The importance of insurance in financial risk management is a significant topic that is likely to appear in future IELTS Writing Task 2 exams. By understanding the key aspects of this subject and practicing with sample essays, you can improve your ability to address such questions effectively.
For further practice, consider writing essays on related topics such as:
- The role of government in regulating the insurance industry
- The impact of technology on the insurance sector
- The importance of insurance in developing economies
Remember to focus on clear structure, varied vocabulary, and a balanced argument. Feel free to share your practice essays in the comments section for feedback and discussion. This active engagement will help you refine your writing skills and prepare for success in the IELTS Writing Task 2.