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Insurance companies use "float" money taken in from premiums. Even though it is not their cash they invest it as long as when needed they can pay a customer claim. Could a non-insurance company that gets funds from customers for holding then create a similar scheme to use these funds for investment as long as they have the funds available when the customer needs them. I would believe the company would have to have full disclosure but if they do, is that possible within the scope of U.S. law?

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    This is a really great question. Any company that holds onto money for whatever reason should seek to invest it, provided liquidity isn't vital for operations. Thus this question really has the scope of any company, quite a scope indeed. Apr 21 '18 at 7:03
  • "even though it is not their cash": why isn't it their cash? Whose is it? It's not the insured's; they don't get it back unless they make a claim, and in that case they can get back more than they've paid in. But without a claim, they get nothing back.
    – phoog
    Jul 31 at 15:52
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Any businesses that takes payment in advance can use that money as they see fit, there is nothing special about insurance companies. Airlines, travel agents and construction companies are all examples of businesses that routinely take deposits.

What you describe is actually a common business model: it’s called “banking”. Banks take deposits and invest the money (usually through loans).

There are some businesses that are required by law to hold funds in trust but these are the exceptions rather than the rule.

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    What if the funds are NOT payments but money that will eventually have to be paid back to the customer. These funds would be separate from revenue.
    – SupremeA
    Apr 21 '18 at 12:51
  • @SupremeA the question has been answered - if you want to ask a different question please do so
    – Dale M
    Apr 21 '18 at 23:40
  • I kind of figured that but was curious if the funds were not revenue but funds simply held for the customer would make a difference. Almost like funds in escrow
    – SupremeA
    Apr 22 '18 at 0:19
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    @RonBeyer A model of collecting money from a customer with the agreement to return the money at a later date is a Ponzi scheme? What if there is a legitimate reason the customer wants the company to hold the money. As long as the company can retrieve funds to settle the account at the agreed time why MUST they keep it in hand. Insurance companies do it and it is an accepted practice. Landlords do it with security deposits. What logic makes this different?
    – SupremeA
    Apr 22 '18 at 5:34
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    @RonBeyer actually- that’s how banks work
    – Dale M
    Apr 22 '18 at 8:23

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