Are Insurance Companies Financial Institutions? (Short Answer: Yes!...)

There are many different financial institutions, of which insurance companies are one. You can separate them into two categories: banking and nonbanking financial institutions. A banking institution would have a full banking license, whereas a nonbanking institution would not have one.

The nine big financial institutions are:

Central Banks
Internet Banks
Savings and Loan Associations
Brokerage Firms
Mortgage Companies
Retail and Commercial Banks
Credit Unions
Investment Banks and Companies
Insurance Companies

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Understanding what financial institutions are

Financial institutions are any organizations or businesses that deal with transactions of money. Whether the person is depositing, investing, loaning, or raising money, financial institutions handle these. It is dependent on your needs as to which financial institution you should use. They are there to make money available for businesses and people. This does not mean that loan companies would give you unlimited amounts of money, nor would insurance companies. They have set rules for what they go by, and it is based on an individual basis.

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Importance of financial institutions

There is a lot that can go wrong with your business or finances, which is where financial institutions come in. With COVID in 2020 disrupting our lives, financial institutions became even more important in helping the economy and people who were put out of work. They are there for hard moments in people’s lives. People were laid off or sent home to work from home, and it is beneficial to have these financial institutions there to help people in these types of situations.

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Why are insurance companies considered financial institutions?

Insurance companies help when there is damage to property, death, illness, income, medical bills, and other losses that could happen. There are limits to it, and you need to be sure you know those limits. There is a general insurance, and then there is life insurance. General insurance is more for short-term coverage, whereas life insurance will usually last for your whole life.

When someone experiences loss in their life, and they don’t have the funds to pay for the damage or a funeral now, because it was unexpected. If they have an insurance policy that covers the loss they would help with the payment. This does not mean that they will cover it fully. It will be according to the policy that was set up and how long it was in place. Sometimes insurance companies have a set time limit before a claim can be made and accepted.

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What part of the Gramm Leach Bliley Act requires financial institutions to secure customer records and information?

You may be worried about all the information you have to provide to these financial institutions, especially insurance companies, getting into the wrong hands. This is a normal worry for everyone. In the Gramm Leach Bliley Act, the Privacy Rules protect consumers’ nonpublic information. This means the information that you give an insurance company, like your social security number, credit or debit card, bank information, payment history, and anything of that nature. You can read more about the GLBA Act here.

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Beware of insurance scams.

There are a lot of spam and scam calls that usually take place, and if you aren’t careful, you might find yourself falling for one. If you do, the risk of your identity and your financial information being stolen is high. The calls tend to go up when open enrollment starts. According to Federal Communications Commission, they put up a fine of $225 million against Texas for their robocalls that many of the billion calls were spoofed illegally.

How to protect yourself from these scams

Do not answer calls from unknown callers.	Look up the number to see if it links back to the company they were calling from.
Do not give out personal information until you are certain that they are whom they say they are.	Check the Better Business Bureau website as they have people reporting scams. Better Business Bureau®
Decline their promotional gifts, especially their free offers.	Check your statement from the insurance if you have one, and call the number on it to double-check the offer that was given to you.

Source: Health Care Scams Tend to Spike During Open Enrollment | Federal Communications Commission (fcc.gov)

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Are Insurance Companies Financial Institutions? (Short Answer: Yes!…)