Literature Review On Insurance

One hundred and thirty five applications were made between Jan.1, 1997 and May 31, 2001.Insurance banks have an uphill battle to convince their customers to establish a bank account because it is hard to determine when and why an insurance customer needs a bank account.Underwriting will stay with the insurers but selling may go both ways by insurance agents or bank employees.

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Given the sources of potential gains, it appears that life insurance companies with their limited underwriting risk and wide variety of other products offered to individual customers would be more attractive targets for banks than other types of insurance companies.

Based on these observations, the authors propose to test whether commercial banks, insurance companies, and brokerage firms were favorably affected by the Citigroup/Travelers merger for impending consolidation of financial services firms.

Diversification benefits and product complementarities (i.e. mortgage and mortgage insurance, auto financing and auto insurance) seem to be the prime motives.

However, some earlier research also suggests that there are few linkages between bank services ands underwriting services in terms of customers, outlets, or other characteristics that generate efficiencies.

The paper stands out because it shows, unlike other earlier research, that property and casualty insurance companies offer larger diversification gains to banks than life insurance companies.

The authors first summarize previous literature that examined motives for combining bank and other financial services.

However, the inability of banks and insurance companies to merge effectively has not stopped the convergence process from a product offering standpoint.

The Insurance Information Institute routinely publishes a chart of financial and insurance products available through major financial services companies from all sectors (financials, securities, P/C insurance, and life insurance).

The idea is that the passage of the FMA opens doors for potential mergers and consolidations across banking, financial and insurance sectors, translating into abnormal positive returns for businesses that are the likely candidate for mergers and consolidation.

The results of the study suggest that the largest returns to the FMA passage were realized by large investment banks and insurance companies.


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