Banks Competing For Advanced Life Sales

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Banks are now getting some traction in their sales of life insurance. First-year life premium sold through banks was up 31% last year to $452 million.

What are banks doing differently? For years they have experimented with a wide range of distribution methods: direct response marketing (mail, phone and Internet); retail life insurance agents; investment sales staff (stockbrokers) focused on selling mutual funds and annuities; platform bankers; and advanced life agents, who cater to the estate planning and business succession needs of affluent customers and commercial clients

Of all these distribution methods, banks are now learning, advanced agents produce the most revenue. The annual Kehrer-LIMRA Bank Life Sales Benchmarking Study found that advanced agent sales forces generated $37,257 in commission revenue per billion dollars of bank assets in 2000, 55% more than the investment sales staff and twice the asset penetration of retail agents (see chart).

But selling to the advanced market puts banks squarely in competition with the most successful life insurance professionals. What are the keys to this market?

We have found the following attributes to be the best drivers to success.

Recruiting Top Agents. Selling to the advanced life market requires top life insurance sales professionals. Much of the mediocre sales performance in bank life insurance efforts in the past can be traced to recruiting agents who were not particularly successful in a career agency or in a personal producing general agent setting.

But banks have been challenged to recruit top agents, many of whom prefer to maintain their independence.

One approach is to joint venture with a life brokerage company that can provide top-level agents to work with banking staff. A life brokerage company may be better positioned than a bank to recruit top agents and to retain them through the learning curve years until they reach optimal performance.

Teaming With Bankers. It is crucial for the advanced agent to develop the confidence of gatekeepers of the banks commercial customers and trust and private banking clients. This confidence-building takes time. Even top agents struggle at first in a banking environment, as they win over the banks relationship managers one at a time.

According to the Kehrer-LIMRA Benchmarking Study, the average advanced agent produces only $53,778 in annual commission revenue during the first one-and-a-half years in a bank. Annual productivity almost doubles during the next two-and-a-half years and improves another two-thirds during the fifth year, before doubling again starting in year six (see chart).

Access to Products. The advanced life market requires a range of products and underwriters to craft the best life insurance solutions.

The advanced life market demands objectivity and creativity. To get the most favorable underwriting terms and top-tier compensation with the nations leading life carriers requires market clout, which is achieved through annual premium production and industry knowledge.

Again, a joint venture with a life brokerage company is one of the best ways to get market clout quickly.

Leverage With Insurers. The advanced market often requires creative solutions that are not provided in the insurance carriers shelf products. To compete successfully, the bank or its brokerage partner must have sufficient leverage with insurance underwriters to develop niche products or exceptions to underwriting guidelines to make the insurance solution work.

An advanced life producer who sends a handful of cases with average premiums to a carrier each year is likely to obtain standard products and underwriting. However, a life insurance distribution company that sends hundreds of cases and millions of dollars of premium to a carrier each year is much more likely to win changes from the carrier that can successfully close a case.

In addition, carriers are much more likely to entertain the development of proprietary products or solutions for the distribution companies providing the most premium.

Case Management. Selling to the advanced market requires not only top level sales professionals with access to the right products; it also requires sophisticated case management.

The back office for many banks is an insurance carrier, a network of independent life brokerage offices or a national life brokerage distribution company. The ability to process business from all market segments, including retail, middle market and the advanced markets, is very important in a bank environment with all the different market segments served.

The new-business development process, illustration capabilities, marketing support, case design and the ability to track cases through the system are critical to supporting the advanced market Case management for this market requires a significant investment in technology for efficiency and flexibility.

Communication with the bank and coordination of the new business and underwriting processes require deep expertise. Experience in the advanced markets is critical where many aspects of a case must be tailor-made, and the sophistication of the banking officer and the client are high.

Compensating Referrals. Motivating bankers who have significant influence with the banks wealthy and corporate clients is critical in securing advanced market referrals and sales. Not only do the bankers need to know the ideal prospect criteria, the “big picture” concept or strategy, and how the strategy fits various target markets, but–to get them really interested in referring their best clients–they should also receive part of the compensation.

Why would bankers refer an important client to someone who, for all they know, can potentially hurt the relationship? They will if it is in the clients best interest and if they get paid for it. The advanced agent models that work best in banks around the country include thought-through compensation plans to motivate bankers to refer their best clients.

Packaged Strategies. Many banks have the ability in-house to develop a comprehensive financial plan for wealthy clients, but few have taken the next step of incorporating the sophisticated tax strategies used by many advanced life agents. Some banks are significantly increasing life sales by involving an advanced agent in these wealth and compensation strategies when developing financial plans.

Banks are squaring off against some of the most sophisticated life sales professionals in competing for the life business of wealthy individuals and business owners. By building a sophisticated sales force, relationships with insurance carriers and a state-of-the-art back office, or by partnering with a life brokerage company that can supplement the banks capabilities, banks have the opportunity to capture market share in this very competitive, but very financially rewarding, segment.

Ken Kehrer is the principal of Kenneth Kehrer Associates, a Princeton, N.J. research and consulting firm that focuses on bank distribution of insurance and investments. Mark Wesson is vice president of institutional marketing for Highland Capital Brokerage, a life insurance brokerage company and a co-sponsor of the Kehrer-LIMRA Bank Life Sales Benchmarking Study. Ken Kehrer can be reached at kenkehrer@att.net.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 22, 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.