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Of late, fusion has become attractive not only in music but in business also. Even small medical shops has doubled up as mini departmental stores selling chocolates, leather slippers, magi noodles etc. leveraging the cross-selling opportunities existing among its potential customers.

Fusion found its path even in the financial services industries also. Banks started selling Insurance, Insurance companies moved away from traditional plans and started selling equity/mutual fund type of products and mutual fund companies started offering products similar to fixed deposit schemes of banks and they are finding such schemes are more popular in the recent past.

It is an irony that appreciation is focused on the extracurricular than the main curriculum. Insurance companies are meant for pooling all the risks and make profits based on the probability of occurrence of loss, the more they spread and have more customers, the probability will become minimal based on the ‘Law of Large Numbers’. So, the customers should be procured beyond the boundaries to get a heterogeneous mix of people.

On the other hand, from some perspective, it can be seen that Banc assurance tries to procure the customers within the boundaries of their reach creating a situation like putting all the eggs in one basket. ING’s decision of Back of Basics is a real eye opener for that matter. This is the second instance wherein earlier Citi Group sold off its stake in travelers insurance to Metlife International.

Theories on ‘success’ stress only one thing “Focus on your strengths and try to strengthen your strengths rather than reducing the weakness”, but none of the financial services segment seems to attain the mastery over their strengths. Insurance companies are more relying upon the investment profits to cross-subsidize its losses it garner from its underwriting losses.

If Insurers are really expert in their field, investment market should not affect them and major chunk of profits should be made out of underwriting, lowered Actual/Expected ratio (A/E), reduced misselling through professional trainings etc. But, Insurance companies have become more active in stock markets with eye over investment profits.

Bankers should be focusing more on procuring more deposits and lend it for building assets, but many analysts have pointed out that Banks major share of income also comes through fee based services which is not their core area. Similarly, the mutual funds should be attracting the small investors to pool the large funds and act as a good platform to earn profits out of bulk purchases and share the same.

Currently, it is time for us to learn, ING & Citi has acted as a ‘Fuse’ that could save high voltage shocks. They have made us to realize it. Banc assurance models should be revisited, Banks entering insurance should also be tested against time as many banks are in need of capital to sustain their own solvency margin and cannot extend the risk of running another insurance company.
One should not forget that the starting point of recession was sub-prime lending and it is not that all the sub-prime loans were sanctioned by the specialized institutions only. But also by various commercial banks who lacked the specialization.

Sticking to a specialization has always made India a proud nation e.g. Institutions like IIM, IIT, IISC, ISRO have sculpted a place in the world history because of their focus and specialization and sticking on to their focus and strengths.

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Bharathy is Bangalore based Chartered Accountant & Cost Accountant, she can be reached at ca.bharathy@gmail.com, the views are personal