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The finance and insurance industry world is one of the widest in terms of services and offerings, and one of the most important in terms of consumer security, in the world. Treated almost as its own complete retail sector in the modern world, gone are the days when the finance industry meant visiting the local bank or stashing cash around the home, and when consumer interaction with the insurance industry expanded as far as getting a pay out when a family member died. Today, finance and insurance is a global industry with input in many different areas, where clients and consumers are actively encouraged to explore their options with various providers - seeking the best deals and benefits packages in line with their individual requirements.
As an industry, the finance and insurance world is subject to constant change as the way that consumers live and go about their daily lives changes. Lifestyle has a huge impact on the way that consumers access and spend their money, it changes how they view different insurance policies, and as life goes it also changes the necessity of where each insurance policy is focussed. A one-size-fits-all attitude is no longer enough, and the once limited industry has subsequently grown exponentially.
What does the finance and insurance industry include?
The finance and insurance industry is made up of establishments and organisations which are skilled in and specialise in dealing with money and financial transactions, including but not limited to:
- Financial security firms
- Insurance providers
- Funds and Trusts
- Credit authorities
To look at the finance and insurance industry from the outside it is easy to see it as merely the goings on in banks and in insurance offices. In fact, as an industry the world of finance and insurance is much wider, and expands to include the security of these locations and job roles, all the technology and electronics going on in the background, the various subsections which deal with different levels of wealth – from credit lenders to wealth management companies – and even the landlords renting office and building space to the running of these companies.
The bank is not just a building full of cash, just like insurance policies and figures are not plucked from thin air. A great deal of research goes into every single policy, with data capture machines working away behind the scenes to generate the most accurate insurance policies for each individual; just like the majority of the wealth contained within banking systems is all held in digital code.
As a consumer, one thing you may have noticed is how easy it has become to access the finance and insurance industry in the modern world. Insurance policy quotes can now be found at the click of a button, and online banking gives us access to our own bank statements and our own pots of money without needing to call the bank or even make an appointment. Automation and technology is one of the most influential trends to have hit the finance and insurance industry, with digitalisation set to stay and make further changes in the industry as more and more consumers become hooked on the new process of money making which is called Bitcoin.
Outside of the obvious financial services, banks and insurance providers, we also have to look at other areas and subsectors which are tied in with the industry as a whole and which have a huge impact on the way that consumers react to and engage with their own finances and insurance policies. These include HMRC in the UK which deals with tax and ensures that each individual worker is paying what they owe to the state; pension companies and institutes; mortgage lenders; even real estate investment trusts and trust fund providers.
Answering common consumer questions about the industry
The fact is that for those not working inside the finance and insurance industry, a lot of the information can bypass them with little understanding of what is actually going on. Many consumers are sent letter from banks which they do not understand, or receive telephone calls inviting them to sign up for services that they don’t know if they need – and it is this which leaves so many consumers subject to scams operated by those who exploit the system and use customer confusion against them for their own gain. Due to this increased risk, which is becoming ever more prominent amid the vast rise in technology and digitalisation of the financial sector, it is important that banks and financial institutes continue to do what they can to educate their customers and clients, and ensure that they are aware of exactly what to do in the face of a potential scam.
With all this work behind the scenes which goes towards keeping consumers safe, one of the major questions asked by consumers is where the profits come from and what keeps so many large companies operating within the sector afloat. After all, the money which is paid into bank accounts stays in the customer’s own account – and the payments and fees made towards insurance policies is held as a retainer for future need. So where does the industry’s profit actually come from?
For those outside the industry, this is where it becomes a little complex – and it’s all because of interest rates. Loans and mortgages define the areas responsible for the biggest majority of profit in the financial industry – purely because as consumers pay back those loans and pay off those mortgages, interest rates are tacked onto the remaining balance. When interest rates drop, mortgages and loans increase in value, and financial institutions can invest more in other projects and investment areas. This leads to more economic growth, and more profit for the state financial industry.
Another common question misunderstood by consumers in the finance and insurance industry is the legal requirement associated with various insurance policies, and exactly what they include. Most consumers are aware of the main insurance policies which include car insurance, home insurance and holiday insurance among other things, but which ones of these legal requirements and which can be signed up to at the discretion of the consumer?
In short, every country or state is subject to its own rule and regulations around insurance. Car insurance is one which is compulsory in most areas, while professional liability and public liability insurance policies are also compulsory for those operating businesses who have employees or else operate within the public sector. In a similar vein, it is compulsory in most locations for workers to pay tax on their earnings – whether they are in employment or are self-employed. In the UK in particular, it is these taxes which pay for council improvements (council tax), which fund future state pensions (National Insurance tax) and which fund the NHS and ensure that all UK citizens have access to free healthcare. All this is possible thanks to the finance and insurance industry.
Top retailers and companies in the finance and insurance industry
The financial and insurance industry is, as we defined earlier in the article, home to a great number of companies and organisations which range from banks to investment brokers, insurance providers, mortgage lenders, trust organisations and more. The industry tends to be dominated by the biggest names in the industry which operate across the widest selection of different services and financial sectors, however there are also some more targeted companies which deal with specific areas of financial and insurance focus – for example wealth management companies.
Some of the biggest and most prominent businesses in the finance and insurance industry include:
- Bank of America
- Goldman Sachs
- Wells Fargo
The list goes on. But the likelihood is that any individual customer with access to one or more bank accounts will have some kind of membership with one of the big names in the industry.
Another growing retail sector which features heavily in the finance and insurance industry is supermarkets and high end retailers like Marks & Spencer, who have expanded into the finance and insurance sectors to offer loyal customers access to various deals and packages which are underwritten by the big names in the finance world and yet are operated at a surface level by these supermarkets and Marks & Spencer that consumers have come to know and trust. What this means is that retail leaders have a hand in the finance industry, while also providing consumers with a high level of service which they have come to expect and which continues to grow and nurture strong consumer relations.
Trends in the finance and insurance industry
As we have already explored, digitalisation and technology is one of the most prominent trends which is making waves in the finance and insurance industry – changing the way that consumers choose to interact with service providers, and creating a demand for instant information which provides consumers with insurance quotes and online bank statements at the touch of a button. Communication is one of the major ways that banks and other financial institutions are choosing to use technology, both through online chats and the slow development of automated conversations which are based on the most common consumer questions and issues – creating digital enhancements to a variety of customer touchpoints in an effort to . The concept here is that the more automated the communication between finance companies and consumers can be, the more quickly consumers will be able to receive responses to their questions – with organisation forums and chat rooms also being set up for consumers to interact with each other and read previous responses to similar issues should they be facing a common problem such as struggling to log in to an online banking account.
Another trend which has been put under an intense spotlight in the last few years is the rise in finance and insurance operations and campaigns which are designed to reverse the damage done in previous years by an industry which consumers had little understanding of. We have already explored how the lack of education in this industry leads to the exploitation of consumers through scams, but what about those consumers who buy into insurance policies and sign up for financial agreements that they not only don’t understand but which they also do not need? The sale of PPI in the 1980’s was a huge move for the industry – and one which is paying the price now, with entire organisations now being founded to manage the legal battle against mis sold PPI which was continually plugged to consumers who didn’t need the coverage and who were therefore paying for insurance that they didn’t need at all.
The rise in insurance bundles is yet another trend which is making waves and helping consumers to make the most of the policies they sign up to – with different insurance providers bundling up policies for car, home, and pet insurance under reduced rates with added benefits becoming available over time. This also means that consumers who need standalone holiday insurance, or wish to add a temporary drive onto a car insurance policy for a set amount of time, can do so quickly and easily under the guidance of a provider and organisation that they already work with and whose terms and conditions they already understand.
And finally, we have the finance and insurance comparison sites which are designed and operated in order to help consumers get their head around the various deals on offer to them, and to guide them towards the policies which are best suited to their lifestyle, their family, their requirement and their budgets. These comparison sites have grown so much in popularity that they are as expansive and successful as the insurance and finance companies that they compare – driving thousands of consumers to upgrade their policies on a regular basis in order to ensure that they are always getting the best deal no matter how much their lifestyles may change. For the consumer who wants to keep their money and their lifestyle safe in the wake of the ever-expanding and ever-developing finance and insurance industry, comparison sites are a great place to start.