Small Business Is The Next Big Thing For Banks

By Valerie Jordan

Bank insurance programs are experiencing high activity as banks seek new ways to increase their revenues.

From this highly charged environment, the next segment of bank insurance customers is emerging. This segment–the small business and commercial customer–provides an unrivaled opportunity to combine an array of property and casualty products/services with those from the life side to fashion a single enterprise solution.

There are about 25 million small businesses in the United States, representing 99% of all employers. They employ over 53% of the private work force, totaling over $1 trillion in payroll. These firms typically have 10 to 50 employees, are privately held/family-owned and represent up to $25 million in annual sales.

There are two key points for bank-insurance reps to remember about these businesses: Many of them do not have an insurance agent; and all of them use a bank. What a prospecting gold mine for a bank insurance agency!

A bank agency can offer a single enterprise solution to small businesses via three different sales initiatives.

First, by using employee benefit programs (group and voluntary), an employer could get a customized suite of products aimed at many of its noninsured and underinsured employees.

Second, owners could offer benefit programs aimed at key employees, boards of directors and, most importantly, themselves.

Third, these programs could be tied to other profitable bank products such as savings and checking accounts and payroll deduction services.

Unlike one-on-one sales to individual customers, however, commercial sales present several challenges.

The first is selling the new business development officer, bank branch manager or bank personnel selling to upscale clients on the benefits of offering an insurance program to their customers. The second challenge is convincing the business employer or owner to buy into the program. And the third is selling insurance plans to the individual employees.

To illustrate the sales opportunities, lets review the three tiers of this insurance sales pyramid.

The bottom tier illustrates voluntary benefits/worksite products that an employer can offer to employees. Each employee has an opportunity to buy individual products and pay for them conveniently through their employer and the bank. Among them are life insurance, long term care, IRAs, auto, homeowner and bank products such as loans and mortgages. The cost to the employer is zero; the employee selects and pays for these benefits individually.

The middle tier illustrates the group employee benefits–life, health and retirement–that are available for each employer. The perennial question for the owner is, what types of benefits to provide at what cost to the company?

The upper tier illustrates products and services targeted at the owners, key employees and board members. These address advanced sales concepts, including buy/sell agreements, deferred compensation and key-person coverage.

A team approach is the best way to present an enterprise-wide insurance solution to the small-business customer.

The banker sets the stage by introducing the concept to his small business customer. This banker can be the new business development officer, the branch manager or someone in the banks commercial area.

Once the clients needs are defined, the p/c agent and the life insurance agent step in. The p/c agent provides access to both commercial coverages for the owners and personal home and auto products for individual employees. The life agent packages a suite of products focused on the owner/employer, key executives and the employees.

To support and administer the sale, the bank can use its own Web site or the Internet to make it easy for employees to enroll for voluntary benefits or to purchase individual coverage. The bank agencys call center can provide the personal touch by giving further product information and continuing service and support to both employees and employer.

These offerings allow the bank to become a full financial services provider to small business. They provide a holistic approach that ties the business client more closely to the bank, increases the banks assets under management and provides needed benefits to the banks customers.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 18, 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.


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