U.S. Financial Institutions
U.S. Financial Institutions
Insurance Companies
Insurance companies are major suppliers of funds. Policyholders make payments (called premiums) to buy financial protection from the insurance company. Insurance companies invest the premiums in stocks, bonds, real estate, business loans, and real estate loans for large projects.
Insurance companies, hurt by billions of dollars in unforeseen payouts during natural disasters such as Hurricane Irma in 2017, are rethinking their reliance on catastrophe-risk modelers, whose risk estimates failed to anticipate cataclysmic storms such as Hurricanes Katrina, Irma, and Harvey. Cat-risk businesses forecast potential weather-related expenses for insurers through sophisticated computer modeling that analyzes historical meteorological data. How do frequent natural disasters affect insurance companies and their policyholders?
| Services Offered by Depository Financial Institutions | |
|---|---|
| Service | Description |
| Savings accounts | Pay interest on deposits |
| Checking accounts | Allow depositors to withdraw any amount of funds at any time up to the amount on deposit |
| Money market deposit accounts | Savings accounts on which the interest rate is set at market rates |
| Certificates of deposit (CD) | Pay a higher interest rate than regular savings accounts, provided that the deposit remains for a specified period |
| Consumer loans | Loans to individuals to finance the purchase of a home, car, or other expensive items |
| Business loans | Loans to businesses and other organizations to finance their operations |
| Electronic funds transfer | Use of computers and mobile devices to conduct financial transactions |
| Automated teller machine (ATM) | Allows bank customers to make deposits, withdrawals, and transfers from their accounts 24 hours a day |
| Debit cards | Allow customers to transfer money from their bank account directly to a merchant's account to pay for purchases |
| Online banking | Allows customers to conduct financial transactions via the internet or through a dial-in line that operates with a bank's software |
| Mobile apps | Technology that allows consumers to download programs to mobile devices that enable them to take care of banking, financial, and other transactions |
| Direct deposit of paychecks | Enabled through employers and payroll service vendors; allows financial institutions to accept direct deposits of payroll checks to consumers' checking and/or savings accounts on a regular basis |