FEAR OF FINANCE
Saturday 28 October 1995
The Pru is starting with deposit accounts and own-brand mortgages financed from its own resources, but current accounts, credit cards and personal loans will surely follow.
Where the Pru leads, Legal & General and other big life insurance companies will surely have to follow. The Pru alone has six million insurance clients and they are prime targets for its banking services. Most bank account- holders also have, or will need, an insurance policy or investment plan, which will make them attractive targets for the insurance companies.
Both the banking and insurance industries have become overcrowded as a result of deregulation and the opportunity for building societies to offer a full range of banking services.
More recently, the explosive growth of telephone banking and insurance selling has brought a range of new entrants like First Direct and Direct Line into both the banking and insurance industries.
As a result, established banks, building societies and insurance companies are being forced to offer telephone-based operations of their own, which only adds to the over-capacity.
The big banks have also moved into insurance in a big way, setting up their own "bancassurance" companies, selling life, motor and household insurance policies to their banking customers. They cannot complain if the insurance companies seek to reverse the process and diversify back into banking. The surprising thing really is that it has taken the insurance companies so long.
Insurers are, however, under growing pressure, caused by consumer resistance to buying big-ticket insurance and investment products. That in turn is the result of the recession, reluctance to take out long-term commitments and the bad publicity over mis-selling.
Banks have had some equally bad publicity, caused mainly by their ham- fisted efforts to cut costs and centralise services. Traditional loyalties are being undermined.
But it is easier for banks to persuade established customers to buy more sophisticated financial products than for insurance companies to integrate their business backward into banking. Insurance firms have little choice but to make the effort, however, and there is no doubt that in the process they will add enormously to the capacity in the banking industry.
The fact Prudential has decided to grow its own banking services rather than buy a building society is, however, bad news for middle-of-the-range insurance companies and building societies.
They may be too small to provide comparable services, and too big to downsize painlessly into a niche where they can provide more expensive and sophisticated services comparable with those provided by private banks and personal services stockbrokers. Further rationalisation in the financial services industry is sure to come and it may not all be bloodless.
Simon Read: The point of having protection insurance? The right cover can help reduce your financial concerns at a time of extreme worry
19 December 2014 07:30 PM
In May Nicola Groves got a massive shock. The 45-year-old mother of two was told, bluntly, that she had breast cancer. "When I heard the words, 'You do have breast cancer and you are going to lose your breast', I felt as if time stood still," she says.
19 December 2014 07:30 PM
It's that time again when the media looks back over the past year and forward to the next. I am reminded of an old film, The Day the Earth Caught Fire (1961). Near the end of the film a newspaper prints two headlines – which one it uses will depend on whether the world is saved or doomed.
12 December 2014 05:42 PM
The supermarket banks have always excelled at offering simple, no nonsense products, and savings accounts is another area in which they fare well
12 December 2014 06:17 PM
The sun is shining on people who struggle to heat their homes and it’s thanks to a sense of community
12 December 2014 06:23 PM
Struggling people need help, understanding and forbearance, not ill-thought-out pronouncements
12 December 2014 06:20 PM
You won’t find me bashing the banks for the sake of it, but sadly they’ve deserved all the criticism that’s been sent their way in recent years
12 December 2014 06:02 PM
Gillian Guy, chief executive of Citizens Advice: 'The injustice of shock bills for crime victims must end. The Government must stand up for consumers and cap bills from lost or stolen phones at £50'
12 December 2014 05:57 PM
Stirring the pot: the Indian Government’s reforms of labour rules offer hope of a brighter future for businesses
12 December 2014 05:53 PM
Knight of the road, look out: you’ve got a new rival
06 December 2014 12:00 AM
Simon Read: The Chancellor has stamped on an unfair tax. But will the delight of homebuyers mean misery for others?
06 December 2014 12:00 AM
Were you surprised by the sudden reform of the rules for stamp duty on property purchases? I certainly was. I've been calling for ages for a change in the tax to make it more fair – and, at a stroke, George Osborne did just that on Wednesday in his Autumn Statement.
29 November 2014 12:00 AM
21 November 2014 04:33 PM
With some people are weighing up whether they will be better off cashing in their final salary pension next spring, Samantha Downes asks the experts
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