Home › B.Com Banking & Insurance › Banking and Finance › Money and Financial Institutions › In the financial system, insurance companies act…
In the financial system, insurance companies act mainly as what?
AUsers of funds, since they borrow more than they save
BIntermediaries that accept deposits from the public
CAgents that clear payments between other institutions
DMajor suppliers of funds to the rest of the system
Answer & Solution
Correct answer: D. Major suppliers of funds to the rest of the system
1. Insurance companies collect premiums continuously and pay claims only as they arise.
2. That leaves them holding large pools of money, which they put to work in the financial system.
3. Insurance companies are therefore major suppliers of funds.
4. They are nondepository institutions, so they never take deposits from the public in the way a bank does.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.3 U.S. Financial Institutions_
Related questions
Why can a large payment processor spot fraud better than a single merchant can?A banking chatbot is best described as what?Which service channel costs a bank the most to provide?What is happening to branch banking as mobile services spread?Which services do fintech firms typically provide?What makes international banking a high-risk venture?Why can lighter regulation abroad make life hard for a bank expanding overseas?Why do large banks look beyond their own national borders?