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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.
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).
Despite the adoption of the Gramm-Leach-Bliley Act (also called Financial Services Modernization Act) in November 1999, there have been few strategic attempts in consolidating financial and insurance businesses and some of them (i.e.
the Citigroup / Travelers or the General Electric / Employers Re. This, despite the fact that some of the research papers cited in the attached literature review do identify diversifications gains from potential consolidation of banking and insurance firms.
They measure the valuation effects resulting from the merger announcement among those commercial banks and financial services firms most likely to be affected and conclude that commercial banks, insurance companies, and brokerage firms have all experienced positive and significant valuation effects upon the announcement of the Citigroup merger.
However, the authors find that the valuation effects are more favorable for brokerage firms than for commercial banks and for insurance companies.
The article projects that banks would add 5-10 percent to their after tax profits if "they aggressively pursue their insurance opportunity." The author develops a pro forma statement for banks selling 12 different insurance items.
This panel discussion on bank marketing suggests more direct interaction with customers by direct mail or personal contact.
Doing it pro-actively and by alternative methods: call centers, PC-banking, internet banking and supermarket banking. Bankers have tried to cut down on personal contact and may have alienated their customers.
Insurance agents of New Jersey, Connecticut and Massachusetts founded an association as ‘Independent Insurance Agents and Brokers’ and have applied for a charter for an association savings bank.