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Outline the arguments for and against banks diversifying into insurance business.
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Outline the arguments for and against banks diversifying into insurance business. Diversification has been a prevailing trend in financial institutions especially by banks spreading deposits and loans across a broader range of economic activities so as to avoid concentration of their personal sector funds in a single aspect of economic activity. This has been largely as a response to deregulation, rising competition and financial innovation in the finance sector. In particular, banks have been diversifying into insurance on a larger scale and for a longer period than in securities. 'The Bancassurer's market share rose from 5.2% in 1989 to around 20% in 1995'1. Banks have also revolutionised their involvement in insurance companies from agency diversification whereby it sells insurance products produced by the insurance companies, to purchasing insurance companies and more recently to developing own diversification where the bank manufactures its own insurance products. A good and probably the earliest...
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