Insurance Companies Vs Banks
An overview both banks and insurance companies are financial institutions but they don t have as much in common as you might think.
Insurance companies vs banks. Although they do have some similarities their operations are based on different models that lead to some notable contrasts between them. Both banks and insurance companies are financial institutions but they don t have as much in common as you might think. Of course insurance companies that operate like commercial or investment banks think pre crisis aig should be regulated like banks.
However unlike the commercial banks and investment banks which are regulated by the federal government the individual state governments oversee the insurance industry and they are the ones that provide the rules and requirements on how companies should manage their finances and the products they sell. However their functions are different. The main difference is that while banks keep a small percentage of their deposits as reserves an insurance company is required by federal.
Although they do have some similarities their operations are based on different models that lead to some notable contrasts between them. An overview both banks and insurance companies are financial institutions but they don t have as much in common as you might think. People around the globe are asking themselves if they should put their money into banks or insurance companies.
While banks are subject to federal and state oversight and have come under greater scrutiny since the 2007 financial crisis that led to the dodd frank act insurance companies are subject only to state level regulation. In a global economy banks have institutions all over the world just like insurance companies. Both banks and insurance companies are financial intermediaries.
An insurance company ensures its customers against certain risks such as the risk of having a car accident or the risk that a house catches on fire. But insurance companies even large ones are different from banks in two important respects which make insurers much less of a systemic threat if they fail than large banks. Various parties have called for greater federal regulation of insurance companies particularly considering that american international group inc an insurance company.
The failure of insurance companies are much different.
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