Magazine article Risk Management

Banks Moving In?

Magazine article Risk Management

Banks Moving In?

Article excerpt

With the new lingo of convergence, integration and disintermediation being volleyed back and forth over the dead-for-now federal financial services bill that would repeal antiquated insurance acts and remove barriers preventing banks from selling commercial property/casualty insurance, no one can really define those terms, determine who the competition will be next year or in 10 years or predict who will survive into the new millennium.

Banks and insurance companies are creating innovative partnerships, buying stakes in both industries and forming strategic alliances to serve the middle market. Just how big is that market? Defined as organizations with 1,000 or fewer employees, experts put middle market insurance worth at approximately $35 billion. And the continuing financialization of the insurance industry will create even more fierce competition for that business. "H.R. 10 paves the way for partnerships like the Travelers/Citicorp merger. These new entities will now be trying to serve clients from cradle to grave," said Diane Askwyth, CPCU, senior consultant at PricewaterhouseCoopers LLP and president of APIW, a professional association of women in the insurance and reinsurance industry.

Speaking at an APIW luncheon program, Peter Gilbertson, senior vice president and director of property/casualty for Chase/USI, said, "this legislation wants to happen, the dispute is in the minutiae. Banks are already in the business, the issue is the increase in pace and efficiency." Pamela Jane Newman, executive vice president of AON Risk Services, termed the trend "vertical integration of the insurance industry."

A Captive Audience?

Mr. Gilbertson laid to rest one looming question, asked repeatedly since the legislation was proposed: do banks have unfair leverage with customers who have loans, a mortgage or other accounts with them? "That presupposes that borrowing clients have no marketplace alternative," he said, "and that banks are pointing guns at their customers. It's a counterintuitive argument that some segments have been making all along."

According to a study by the Association of Banks-In-Insurance, 79.5 percent of survey respondents--commercial banks and savings institutions--target retail banking customers, 63 percent mortgage banking customers and 53. …

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