Banks Insurance Sales Continued Growing Strongly In 2000

Some 45.7% of banks distributed insurance products in 2000, up from 40.4% the previous year, a study by the American Bankers Insurance Association in Washington finds.

The estimate is extrapolated from 366 commercial banks and thrifts of all sizes responding to a recent survey by the ABIA. Respondents represent roughly 4% of all U.S. banks, ABIA says.

ABIAs “2001 Study of Leading Banks in Insurance,” conducted by Reagan Consulting in Atlanta, adjusts the data by asset size to reflect the bank industry as a whole.

Extrapolating from its data, ABIA estimates that total insurance premiums collected by banks during 2000 was about $44.9 billion, up 22.3% over 1999.

The greatest rate of premium growth was in commercial property/casualty and group life/health, which together grew nearly 23%, from $4.4 billion in 1999 to $5.4 billion in 2000, ABIA reports.

Nearly 43% of banks with under $1 billion in assets sold general lines, up from 37% the year before. Participation in insurance by banks between $1 billion and $10 billion remained unchanged at 52%, while banks above $10 billion in assets reported 96% participation, up from 88%.

Banks saw their highest profit margins from insurance in group life/health lines. These products provided a pre-tax net income margin of 27.5%, compared to 25.4% for individual life/health, 22.1% for commercial p/c and 20.1% for personal p/c, ABIA reports.

For the 33% of banks selling individual life/health products, the preferred distribution method was through de novo (i.e., new) agencies, compared to 25% using acquired agencies, ABIA found.

Yet the study found that when asked to rate distribution methods for effectiveness on a scale of 1 to 5, the de novo approach received the lowest rating, 3.1.

Third-party marketers, ranked at about 4, were deemed by banks as the most effective way to sell individual life/health products, even though only 17% of the surveyed banks used TPMs for this purpose.

Twenty-five percent sold individual life/health products through acquired agencies, scoring that method at 3.4 for effectiveness. Of remaining banks, 15% sold directly through carriers and 10% used joint ventures, ranking both on average at between 3 and 4.

Most banks preferred face-to-face contacts with customers when selling life/health products.

Agents in branches were used by 57.5% of banks, and 24.5% said this was their primary distribution channel for life/health products. Yet branch agents scored an effectiveness rating of only 2 from the surveyed banks.

Among banks with assets under $1 billion, 42% used branch agents as their primary channel, compared to 14% of banks with assets of over $10 billion.

Banks in life/health insurance also liked to team agents with their securities/investment group (59.6%), commercial bankers (57.4%) or trust departments (46.8%). More than 16% said one of these channels was their primary means of distribution.

Bank/platform employees were used by 51.1% of banks, although only 16.3% said this was their primary means of life/health product distribution.

The main targets for banks selling individual life/health products were customers classified as mass market retail (24.5%), affluent (16.3%), trust/private banking (14.3%), securities/investments (12.2%) and senior retail (12.2%).

For banks selling life/health insurance through agents/producers, salary plus commission was the most common remuneration scheme (by 38%), followed by commission plus bonus (28%). For 10%, compensation was primarily salary only, while 16% used salary plus bonus and 8% used salary plus commission plus bonus.

For customer service representatives, 40.5% of banks paid them salary only; 24.3%, salary plus commission; 32.4%, salary plus bonus; and 2.7%, salary plus commission plus bonus.

To employees who referred customers to producers for insurance, 32.7% of banks in insurance said they paid a fixed amount of $20 or less, while 10.2% said they paid more than $20.

Another 30.6% said compensation for referrals was just one element of a broader incentive program for bank employees.

For 14.3% of banks, employees were not compensated at all for referrals, while 12.2% provided noncash compensation.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 4, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


Copyright 2002 by The National Underwriter Company. All rights reserved. Contact Webmaster