CIMA BA1 Financial markets and institutions

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1. Ken Garrett says

   January 1, 2022 at 11:33 am

   A distinction has to be made between insurance companies simply insuring your car (for example) and insurance companies receiving funds from their clients for further investment. Many people use insurance companies as institutions in which they invest most of their savings.

   For example, an endowment policy is an investment with life insurance attached to it. The premiums paid in by the policy holders is used by the insurance company to invest in the market, and at the end of the pre-agreed term (usually 15 – 25 years) policyholders will receive a cash lump sum payout from their policies.

   They are often used by people as a way to save for retirement, but the life insurance aspect gives the security of making sure that their loved ones are covered in the event of early death.

   My first mortgage to buy a house used an endowment policy. Instead of repaying capital to by lender, I paid into an endowment policy. When that matured the hope was that the amount paid to me from the insurance company would be enough to pay what I owed to the bank.

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2. Suze90 says

   December 31, 2021 at 1:43 pm

   I thought insurance companies are classed as financial intermediaries as they do not fulfil the ‘financial intermediation’ definition, in that they do not match borrowers with depositors.

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