Learn a little bit of finance every day

Chapter 19 Financial System "Family Portrait" (2)
I am afraid that people can't even imagine that the banknotes in modern banks were developed in this way.From the above information, we can see that banks originated from the ancient currency business.The currency business industry is mainly engaged in currency-related businesses, including identification and exchange of metal currency, currency custody and exchange business.When a large amount of money gathers in the hands of money dealers, it provides a prerequisite for the development of the loan business.With the development of the payment business, the safekeeping business has gradually changed into a deposit business.When monetary activities are combined with credit activities, the money management industry begins to transform into a modern bank. In 1694, the establishment of the Bank of England marked the establishment of the modern western banking system.

The word bank originated from Banca in Italy. Its original meaning was benches and chairs, which were the earliest business tools of money changers in the market.English is transformed into Bank, which means a cabinet for saving money.In my country, the reason why it is called "bank" is related to the history of my country's economic development.In the history of our country, silver has always been one of the main monetary materials. "Silver" often represents currency, while "hang" is the title of a large commercial institution.The term "Bank" is used to refer to large financial institutions that deal with money and money, which was first seen in "A New Chapter of Senior Citizens" written by Hong Rengan of the Taiping Heavenly Kingdom.

A bank is a financial institution that undertakes credit intermediary through deposits, loans, exchange, savings and other businesses.It is one of the financial institutions, and it is the most important financial institution. Its main business scope includes absorbing public deposits, issuing loans, and handling bill discounts.

In our country, there are many classification methods for banks. Generally speaking, the general classification method is to classify banks according to the following methods:
The first category is the People's Bank of China, which is the central bank and plays a management role among all banks.

The second category is policy banks, such as Agricultural Development Bank, China Development Bank, and Export-Import Bank, which generally handle policy-related business and do not aim at profit.

The third category is commercial banks, which can be divided into national state-owned commercial banks, such as ICBC, Agricultural Bank of China, Bank of China, and China Construction Bank; national joint-stock commercial banks, such as China Merchants Bank, Huaxia Bank, Minsheng Bank; regional commercial banks, such as Guangdong Development Bank Banks; local commercial banks, such as Wuhan City Commercial Bank, Bank of Nanjing, which was only listed.However, as the scope of banking activities has expanded, the differences between the three types of banks are narrowing.

The last category is foreign banks.There are many foreign banks, such as Citibank, HSBC and so on.Now, foreign-funded banks are generally located in first-tier cities, and their business is quite different from that of domestic banks, and their business scope has been gradually liberalized.

Non-Bank Financial Institutions: Insurance Institutions
China Life is the leader in China's life insurance market.As the largest life insurance company in China, China Life Insurance Company Limited has always maintained a leading position in the life insurance market in mainland China.According to Chinese accounting standards, the company's market share reached 2006% at the end of 45.27, maintaining its leading position in China's life insurance market.China Life is a leading provider of individual and group life insurance and annuities, accident insurance and health insurance and other insurance products and services.Through the holding of China Life Asset Management Co., Ltd., it has become the largest insurance asset manager in China and one of the largest institutional investors in China.

According to the data of "Insurance Market Research in China's 50 Cities", China Life has a brand recognition rate as high as 92.3%, making it the most recognized life insurance brand among Chinese consumers.

The three types of insurance that people usually come into contact with are life insurance, property insurance, and accident insurance.

Our lives are always threatened by various injuries. Therefore, we must adopt a method to deal with personal dangers, that is, to provide certain material assistance to the people and their families who have personal dangers. Life insurance is based on Human life is the subject of insurance, and life and death are a kind of personal insurance for insured accidents.

Property insurance refers to the insurance in which the policyholder pays the insurance premium to the insurer according to the agreement in the contract, and the insurer assumes the liability for compensation for the loss of the insured property and its related interests due to natural disasters or accidents according to the agreement in the insurance contract.It includes property insurance, agricultural insurance, liability insurance, guarantee insurance, credit insurance and other insurances with property or interests as the subject of insurance.

Personal accident insurance is an insurance that takes the human body as the target and pays for death or disability due to accidental injury.It refers to the personal insurance contract under which the insurer shall bear the responsibility of paying the insurance money according to the agreement when the insured suffers bodily injury or becomes disabled or dies due to an accident.The benefits of the insurer usually include benefits for incapacity to work, benefits for loss of limbs or blindness, benefits for death due to injuries, and benefits for medical expenses.Accidental injury insurance must meet two requirements: first, the injury must be a physical injury; second, the injury must be caused by an accident.

The insurance industry is something we often come into contact with, so how much do you know about the insurance industry?
Insurance (only refers to commercial insurance) means that the insured pays the insurance premium to the insurer according to the contract, and the insurer is responsible for indemnifying the insurance money for the property losses caused by the possible accidents agreed in the contract, or Commercial insurance that assumes the responsibility to pay insurance benefits when the insured dies, is disabled, or is sick, or reaches the age and time limit agreed in the contract.It belongs to the channel of financial intermediation, so it is also a kind of finance.

Insurance is an economic form in which the economic relationship between the two parties is established in the form of a contract, and the insurance fund established by paying insurance premiums provides economic compensation or payment for losses caused by disasters and accidents within the scope of the insurance contract.Insurance belongs to the economic category, what it reveals is the attribute of insurance, and it is the essential thing of insurance.Essentially, insurance embodies an economic relationship, which is mainly manifested in the commodity exchange relationship between the insurer and the insured and the income redistribution relationship between the two.From an economic point of view, insurance is a method of apportioning losses. Most units and individuals pay premiums to establish an insurance fund, so that the losses of a few members are shared by all the insured.

It is one of the oldest risk management methods.In an insurance contract, the insured pays a fixed amount (premium) to the insurer, who receives a guarantee that the latter will pay certain compensation for any loss caused by a specific event or group of events within a specified period.

The insurance companies that everyone comes into contact with daily are economic organizations that operate insurance business.Specifically, it refers to commercial insurance companies established with the approval of China's insurance regulatory agency and registered in accordance with the law, including direct insurance companies and reinsurers.The Commercial Press' "English-Chinese Securities Investment Dictionary" explains insurance companies as: insurance company, a company that sells insurance contracts and provides risk protection.It can be divided into two types: life insurance companies and property insurance companies.An insurance company is an insurer that adopts the organizational form of a company and operates insurance business.The insurer in the insurance relationship has the right to collect insurance premiums and establish an insurance premium fund.At the same time, when an insured accident occurs, it is obliged to compensate the insured for economic losses.

how insurance companies make money

I would like to ask, the insurance company collects a small amount of insurance money from the policyholder, but whenever an accident occurs, the insurance company has to pay the policyholder ten times or even dozens of times the compensation.As far as I know, every business is for profit, so how can insurance companies make money like this?How exactly does it work?
Many people have such doubts.How do insurance companies make profits?

In fact, insurance is still mainly based on investment, and the annual premium collected is a very small part compared to the investment income of the insurance company.Insurance companies have 9 major investment channels. After the "National Ten Rules" come out, there will be more investment channels, and the insurance company's income will be greater, so customers who buy dividend insurance will get more benefits.

Specifically, the profit of the insurance company is realized through the "three differential benefits", namely: the death differential benefit - refers to the benefits generated when the actual death toll is less than the scheduled death toll.Expense difference benefit - refers to the benefit generated when the actual operating expenses are less than the operating expenses calculated according to the predetermined operating expense rate.Interest rate difference—refers to the interest generated by the investment rate of insurance funds higher than the average predetermined interest rate of an effective insurance contract.

Let’s illustrate with examples. Let’s talk about the death rate first. For example, the cancer mortality rate is 90% now, so the insurance company will set the premium according to this probability. The insurance premium is collected in the form of how much compensation is paid, so it stands to reason that when 100 people die to 90, the insurance company should spend all the money collected, but at this time, cancer is no longer terminally ill. If 90 people died, but only 20 died in reality, then the money received before would have a relative balance, which is the "death difference".Of course, this may also be negative. For example, if 99 people die, the insurance company will become a "death loss".This situation will not change significantly within one year, but in 20 years or longer, there may be definite profits, because the level of medical care will only get higher and higher, and many diseases will be gradually cured. capture.The survival rate for the same disease will only increase over time.

The second type is "fee difference". It was originally expected that in order to maintain the operation of this part of the premium, I would need to charge each customer a certain fee, but after the collection, the management level has improved, and I don't need so many people so much money to pay for it. Management can achieve better management results, then there may be savings in expenses.

The third is "interest spread". The insurance company promises to return you double the money after 20 years of paying the money, but when 20 years later, the insurance company has used your money to earn 400% of the income, then in addition to giving After your 2 times, the rest becomes the income of the insurance company.

Some people say that the insurance company is cheating money. This kind of argument is not convincing. The money in the hands of individuals is more likely to be used for retirement but will be spent by their children, and if they are going to see a doctor, an unwise investment may be enough. If you lose money, in fact, as long as you don’t have the determination not to take it out, the so-called pension money and medical treatment money are simply impossible for you to take out when you need it, so it is very necessary to have an insurance plan first.

Financial Intermediation: A Bridge Between Supply and Demand
The winter of 2007 in New York was exceptionally cold. In November, the CEOs of Merrill Lynch, the largest Wall Street securities company, and Citigroup, the world's largest financial consortium, changed hands one after another.Wall Street and the entire financial world were shocked.And when Merrill Lynch and Citigroup were searching for a CEO successor in full swing, they all locked their eyes on the same person.This person is a legendary figure on Wall Street-John Thain.

John Thain finally abandoned Citigroup and walked into the troubled Merrill Lynch.

But in less than a year, this legendary financial figure on Wall Street personally sent a 94-year-old investment bank into the history books. In September 2008, John Thain sold all of Merrill Lynch, one of the top five U.S. investment banks, to Bank of America for $9 billion.The purchase price is only about two-thirds of Merrill Lynch's market value a year ago, and only half of the bank's peak market value in early 500.

(End of this chapter)