Insurance Companies are similar to commercial banks in that they

Step 1: Analyze the question We are asked what insurance companies and commercial banks have in common. Look for a function that both perform.

Step 2: Explain the concepts

• Commercial banks accept deposits from the public and lend them out. In doing so they mobilize savings and channel them into investment.
• Insurance companies collect premiums from many policyholders. They keep a large pool of funds, which they invest in shares, bonds, real estate and government securities. This also mobilizes savings for investment.

Step 3: Evaluate each option

• A. Compensate their customers for losses: Only insurance companies do this. Banks do not compensate customers for losses, so this is not a similarity.
• B. Act as lender of last resort: This is the role of the Central Bank (the CBN in Nigeria), not commercial banks or insurance companies.
• C. Help in maintaining monetary stability: This is also a function of the central bank through monetary policy.
• D. Help in mobilizing savings for investment: Both institutions gather funds from the public (deposits or premiums) and invest or lend them for economic activity. This is the correct similarity.

Step 4: Answer

Tip: In "similar to commercial banks" questions, rule out central bank functions (lender of last resort, monetary stability, issuing currency) first. Then eliminate functions unique to one institution (such as compensation for losses). What remains is usually the shared financial-intermediary role: mobilizing savings.