FIIA Study Finds Banks Favor One-On-One Selling For Insurance

By

Scottsdale, Ariz.

Referrals by bank personnel that are followed by face-to-face selling by insurance reps remains banks favorite approach to insurance sales, a new study by the Financial Institutions Insurance Association finds.

The Internet is largely unused for sales but will likely see an increasing role over the next few years, the executives interviewed for the study say.

The study, whose results were outlined at the FIIA annual conference here, was based on in-depth interviews with 10 top executives in charge of their banks insurance operations. It was conducted by Carmen F. Effron, a bank-insurance consultant in Westport, Conn. who is on the FIIA board.

Although acknowledging that the study sample was small, Effron said in an interview that the unidentified banks were considered leaders in the sales of insurance. They have been selling insurance for an average of 6.3 years.

Effron described three of the banks as money-center institutions, or national retail banks, with $60 billion to $120 billion in assets. Three were super regionals, that is, represented in multiple states, with $10 billion to $25 billion in assets. Four were community banks, with $61 million to $2.3 billion in assets.

Effron told conference attendees that she found a strong correlation between the length of time a bank has sold insurance and its overall satisfaction with its program. This, she suggested, means that insurance success requires banks to be patient.

Banks that were most satisfied with their insurance programs generally used more than one sales channel for the purpose–for instance, acquiring agencies while also entering into joint ventures with outside third parties, Effron reported.

Satisfaction also seemed to depend on bank size, with larger banks feeling happier about their insurance programs than smaller ones.

Banks with assets of less than $2 billion and whose insurance programs had existed for less than four years rated themselves only moderately satisfied.

In the area of marketing tactics, seven of the 10 executives felt that a referral program, in which platform personnel were trained to direct customers to insurance reps, was the best approach. Those banks that had been in the business for at least four years rated referral programs the highest, Effron reported.

Direct mail, including information sent with account statements, was the next most favored tactic.

Effron said an apparent weakness uncovered by her study was that banks seem to know little about how well they were doing in insurance sales, aside from broad sales figures.

Only three of the executives, for instance, were able to estimate their institutions cross-selling ratios. They guessed on average that they were able to sell insurance to about 1.5% of their banking customers.

Their inability to analyze bank-insurance sales reflected the slow pace of agency integration into operations, Effron said.

Banks in general are still not giving insurance enough attention to develop the systems needed to analyze the business, she concluded.

In an interview, Effron said banks need to create cross-functional teams to integrate insurance into banking services.

“For example, they need to put trust and commercial bankers onto teams with their insurance people,” she said. “It is one of the ways you are going to start to see real change.”

For the most part, Effron noted, the potential of the Internet remains largely untapped. Banks use their Web sites mostly to educate customers about insurance.

She still expects more banks to get into using the Web to sell, however.

“Reliance on face-to-face sales makes sense, but they also need to use technology to advantage,” she concluded.


Reproduced from National Underwriter Life & Health/Financial Services Edition, May 6, 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.