State legislatures have enacted numerous statutes for regulating the business of insurance, and regulators have promulgated complex mechanisms of enforcing those laws, to ensure insurer solvency and protect consumer interests. Insurers also need to comply with the rules of various involuntary pools, residual market mechanisms, guaranty funds, and other state associations. In contrast, insurers' marketing focuses on the type of customer, as much as on the quantity of customers. Where a bank may be eager to increase its customer base, it may be more prudent for the insurer to underwrite selectively. Banks may need to learn new skills as they acquire and attempt to integrate insurance agencies into their operations.
Banks possess a ready and large source of capital that can be used to expand writings.
Banks need to know that rapid growth in the insurance industry, while tempting, is risky. Banks who do not develop the necessary skills early in their insurance careers may find themselves facing customer dissatisfaction or financial difficulties. It is important for both the banking and insurance industries to be aware of the issues that will accompany the growing involvement of banks in insurance activities over the next several years.