Credit unions can be said to be depository institutions that make loans as well as accept deposits. They are smaller than other depository institutions, for instance the bank. However, they have registered significant growth over the past few years. Although they are smaller than the banks, credit unions operate below the banking statutes and their laws and rules are identical to those of the bank shifts (Mishkin 45).
One of the reasons why credit unions are smaller could be because they are owned by the members. Therefore, each member would be entitled to vote while selecting their board members and also in other decision making. This is in contrary to the other institutions where rights to vote are general and are allocated to the shareholding rather than just being just a member. The second reason would be the fact that credit unions never issue capital stock. Instead, they net worth, or accrue capital through retaining their earnings. Credit unions usually build up their net worth from the ground. On the other hand, banks involve contributions and share holdings that build up faster as compared to credit unions.
The third reason could be the fact that they rely on volunteers. These are elected according to the ranks of membership, and they are unpaid board of directors. Banks and other depository firms do not rely on volunteers thus they build up fast since their members are well paid and motivated. The fourth reason would be the fact that credit unions can only operate as not-for –profit unlike other institutions that are shareholders-owned institutions. This means that their earning can only be used for provision of services or retained as capital or distributed to the respective members as interest on their shares. Then the last reason why credit institutions are small could be due to their acceptance of only members who are articulated in the field of membership. These members share one common bond. These bonds are associational bond for association, geographical bond for people attending school, working, and living or in a particular religion (Krishnaswamy 10).
There are over 2,300 life insurance companies in United States currently. Majority of these companies organize themselves as mutual or stock company. Again, these mutual banks for savings, guarantee capital insurers, fraternal organization as well as government via veteran life insurance that also sell life insurance. Therefore, mutual and stock insurance sell 98 % life insurance with 2% remaining for the saving banks as well as U.S government. Mutual life insurance just like fraternal organization employs lodge system thus taking advantage of the tax free status by the state.
There is usually a characteristic process of supervision and regulation of life insurance. This involves analysis of the returns that are made by the central bank of U.S. This is followed by risk rating of the process and the general insurance. The government performs themed inspection over the life insurance company. The undertakings of the life insurance hold annual review meeting to regulate and supervise the deal. Then there can be regular engagement and correspondence under the supervision of the central bank. The process follows the fitness and mobility of the consumer protection, minimum competency and consumer protection code (Ngao 58).
Recently, Service Tax got introduced in life insurance investment policy thus the bonus that would be declared annually would be shooting up and would return to the investors. Again the government increased surrender value as it would depend on the terms and policies for paying the premium. For less than ten years, premium pay, two years would be granted for the payment of the policy. There is a decrease in the premium for the life insurance and also increased death benefits are some of the changes that have been put forward recently concerning the insurance investors. All this changes are aimed at balancing the insurance provider to deliver and ease the payment deal for the consumer.
Krishnaswamy. Principles & Practice Of Life Insurance. New Delhi: Excel Books India, 2009. Print.
Mishkin, Frederic S. The economics of money, banking, and financial markets. Boston: Addison Wesley, 2003. Print.
Ngao, Tieu. Institutional Investors Managing Investment Portfolios. Boston: eBookIt.com,, 2013. Print.