Over the years, banks and insurance companies have been in the spotlight more than ever before. Across the world, the global crisis has really bought banks and insurers to the forefront. Some of our most well-known banks have been investigated for misconduct, which could have caused the financial crisis in the first place. Many banks have had to access their liability insurance and business insurance policies to be able to counteract some of the claims that are being made against them. As the global market changes, so does way the banks now do business. Below we will take a look at some of the areas in which this type of misconduct has affected the banking and insurance industries and how they have made efforts to change the practices that initially brought on this problem.
After the world’s markets collapsed, all eyes started to look at insurance companies and banks. Insurance companies have always been there for businesses and personal policies for a variety of things. Insurance companies can cover most areas, for example business asset finance is covered by business asset insurance, which is insurance that will protect the businesses assets in the event of theft or financial crisis. Other areas where insurance companies play a key role is for personal insurance such as car, home and travel. These are usually very heavily regulated to make sure that the consumer knows exactly what they are covered for.
The Future for Insurance Companies
Insurance companies are now seeing some form of recovery. Although premiums are increasing across the globe, there seems to be some stability within the insurance markets. They have started to be more heavily regulated and checks are being made to ensure they are all following the best practices that have been put in place. With advancements in IT, it is now easier to track problems, giving rise to a better reputation to insurance companies on a whole.
If we take a look at personal insurance as an example, this market has seen a massive increase in revenue because of the increasing insurance premiums and our hunger to insure and protect more things. In the past, home and car insurance were really the only types of insurance that a personal consumer would have. Now however we see that we are insuring more and more such as our phones, tablets and laptops by taking out specific individual policies. Insurance companies even offer banks favourable deals which they can offer to their customers.
The future of insurance companies looks brighter due to the regulations that have been put in place. Only time will tell how this will pad out in years to come.
Banks have been the back bone of many western economies. When the financial crash happened, the banks were the first ones to suffer. Banks have many functions. They save your money, they lend you money and they can deal with all of your financial affairs. However, banks have a responsibility of lending that money responsibly and the financial crash was a result of irresponsible lending to potentially bad debtors. Banks charge a higher interest rate for those who are not as creditworthy as others. The reason for this is that they make their initial lending amount return to themselves quicker so that they lower the risk of never receiving that money back. The banks failed to predict that the mentality of those higher risk borrowers may in fact cause a financial collapse. As this problem affected the whole world, many leading banks were accused of misconduct.
As some banks faced collapse, the way in which we now view banks has changed. We now have concerns that our money is not safe and whether or not our banks will be in a position to honour our interest payments. Therefore, banks are more in the spotlight than ever before.
There have been a number of high profile incidents of misconduct within the banking industry. One of the most high-profile cases was Barings Bank whereby Nick Leeson managed to generate millions of pounds worth of losses. This was one of the biggest examples of misconduct in banking history.
The Future for Banks
As we have mentioned above, banks have been able to offer their customer insurance policies are part of their personal banking packages. Banks have had their reputation tarnished in recent years, so as with the insurance companies, they too are now more heavily regulated than ever before. Governments are now keeping a closer eye on the way that banks trade and many countries have legislated to ensure that responsible lending is key to the bank’s ethos. It is now more difficult to borrow money from baking institutions than it was ten to fifteen years ago. Although this may seem like a hindrance to many consumers, banks have finally cleaned up their act so we can now rest assured that the changes that have been made are starting to pay off.
The future of banking also seems to be brighter than before as banks now are choosier in the way that they lend their money. This may not necessarily suit the masses, but long term it will help to stabilise the world’s economy.
We have highlighted the problems that both banks and insurance companies faced. Although it is impossible to completely eradicate all misconduct, we can all now see that banks are insurance companies are more transparent in the way that they do business and we have learned from the mistakes that were made in the past. The world’s global market has finally started to show signs of improvement as we now move into a new era of financial stability.