Can Insurance Sales By Bank Investment Reps Work?

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By virtually all accounts, financial institutions have been very successful in the distribution of investment products–primarily mutual funds and annuities–to their base of customers. Many of these banks and the investment reps that serve their customers are looking for additional opportunities to broaden the array of financial products being offered.

History suggests, however, that adding insurance products, primarily life insurance, to the work of a bank investment rep is not an easy quest. Hazards include:

  • Product overload;
  • Insufficient training and support;
  • Competing product and sales management;
  • Burdensome administration and paperwork;
  • Differing sales cycles for investments vs. insurance sales; and
  • Compensation differentials.

Banks using investment reps to expand into life insurance, or those who have done so with disappointing results, should consider these five critical elements to increase the chances for success.

1. Focus the product offerings. Given the amount and complexity of investment products reps already handle, the array of life insurance products they are asked to sell should not be too broad. Given the more transactional environment an investment rep operates in, the emphasis should be on simple applications and products with expedited case processing.

Basic term insurance coverages and single premium life sales fit this criterion. More complicated products, such as long term care, universal life and variable life, invite elongated processes and complex needs that do not mesh with a typical investment reps sales cycle.

2. Target the easier customers. The addition of life insurance coverages to the array of products offered by bank investment reps tend to expand the customer universe available to the rep, as well as give opportunities to cross-sell additional products to existing customers.

Investment reps can offer term insurance to younger customers with growing families and debts, for instance, while selling single premium life insurance to those older clients who may have purchased annuities in the past. However, business owners with more complex needs and wealthy retirees with estate-planning issues may not be best served by investment reps with limited sales support, product knowledge and case design expertise.

3. Be prepared to provide extra support. Once the initial product set is determined, initial and continuing training is critical on each product and, more importantly, on how to do a proper needs analysis and how to determine suitability. Additionally, the banks agency or third party marketer must be able to process, track, report and adjudicate the insurance cases and revenues generated by the rep in a timely and accurate fashion for proper compliance and customer service.

Finally, the investment rep needs a whole new set of tools, such as quoting capabilities, needs analysis forms, underwriting tables and applications, that remain current and convenient.

4. Balance the compensation formula. To be successful, any insurance compensation plan must avoid encouraging one type of sale–insurance or investment product–over the other.

For example, funding for college education may involve insurance, investments or both, depending upon the clients profile and objectives. The rep should be indifferent to the products sold from a compensation aspect so he can concentrate on providing the right solution for the customer.

Additionally, if different individuals manage the banks investment and insurance programs, these managers should be measured and compensated on the effectiveness of the cross-selling initiative.

5. Be prepared to offer backup. Depending upon the customer base of the bank–for example, if it has substantial commercial accounts or trust clients–an investment representative may need the help of an insurance specialist to serve those clients with more complex needs. This experienced, insurance-only professional would receive referrals from investment reps who serve wealthy customers and business owners.

Properly done, it can be appealing to use investment reps to sell insurance. They already have the sales acumen for financial services, they have a steady stream of new and existing customers and it is convenient for most retail customers to meet with just one representative. Moreover, these customers seem to have a preference for buying at the bank.

These reasons, plus the attractive financial dynamics of adding revenues on a primarily variable-cost basis, make insurance sales through the investment rep channel a key ingredient in a banks overall insurance distribution strategy.

Robert K. Gallmann Jr. manages the insurance efforts at Fulton Insurance Services Group Inc., a wholly-owned subsidiary of Fulton Financial Corporation, Lancaster, Pa.,

a bank holding company with operations in Pennsylvania, Maryland, Delaware and New Jersey. He can be reached via e-mail at bgallmann@fultonfinancialadvisors.com.


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.