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Banks sales of life insurance are often lackluster because their programs lack a clear strategy and a commitment from the top, concludes a new study conducted for Sun Life Financial Services of Canada Inc., Toronto.

Although life insurance in banks has strong growth potential, its current volume is limited, reports the study by Cast Management Consultants, Los Angeles. Cast concludes that product complexity, inadequate sales management and poor training are some of the problems facing banks in selling life products.

“Life insurance sales need to be viewed as a separate business, not just as another item on the banks menu of products,” says Robert Spadafora, president of Independent Financial Marketing Group, Purchase, N.Y., a Sun subsidiary that sells insurance through banks.

“Simply giving banks access to life products is not going to provide the institution with a winning model,” Spadafora says. For the most part, licensed representatives who sit in the banks lobby tend to be more transactional than relationship-oriented, he notes. “When you get beyond simple term to more permanent insurance, they dont have the expertise to be successful,” he explains.

He notes that because the sales volume of annuities and mutual funds has been outstanding for many bank reps, they may reason, why bother to sell life? Several general approaches to insurance selling have been successful in overcoming these obstacles, the Cast study found. But the consultants say management must be willing to make a long-term investment to make them work. For large banks, one model that appears to work well is teaming up with an advanced agent to help sell high-end accounts, Spadafora says.

This approach works best with a revenue-sharing arrangement between the bank and its third-party insurance marketer, he contends. “In some cases, we assigned a career agent to a bank program and put in a plan to share commissions. But we found bank reps dont like to share commissions, so we had marginal success with that approach,” he explains.
Under this model, the advanced life specialist is given access to the banks trust, private banking and commercial clients–customers who need higher-end insurance.

Its also important for the advanced life agent to make sure everyone in the bank is on the same page, Spadafora points out. There are often political considerations within the bank that come into play when dealing with the high-end client. Each division has its own turf to protect. Among small banks and thrift institutions, a different strategy is often called for, according to Spadafora. “The best game plan [for thrifts] is to deploy life wholesalers to work with the retail sales force, who would earn commissions while the wholesalers earn an override,” he says. “This eliminates commission splitting.”

The override, based on the amount of premium the registered representative sells, is not deducted from the reps commission. In this setting, the wholesalers personally get involved in closing sales. The wholesaler typically also provides the banks employees with training and coaching.

The Cast study found, regardless of the model used, that banks need to figure out who are their prime life insurance customers and what products meet their needs. This will allow the bank to estimate its life insurance sales potential, says Spadafora. Historically, annuities and mutual fund sales have equaled 2% to 3% of a typical banks total deposits, Spadafora says, adding this is also a good guide in estimating potential sales of life insurance. From there, the agent and bank should be able to develop a workable business plan.

A big part of planning is about how to compensate the agent or bank representative selling insurance, notes Greg Fast, a vice president of Cast. “There are some big cultural differences between banks and agents around the issue of compensation,” says Fast. “Getting it right can take a few iterations to find the mark. For a lot of people whose main business is not selling insurance, at first the compensation may not seem attractive. So the bank may need to provide some bonusing.”

The Cast study found banks often do not develop a detailed plan for selling life insurance. “To expect a banker to take to insurance and do well when its not his main job is asking a lot,” Fast says. “Just as its hard in a career agency to make agents successful, so banks will also find it hard. Theres a lot of hand-holding, a lot of wholesaling support needed, more than you might need for other products.”


Reproduced from National Underwriter Edition, February 10, 2003. Copyright 2003 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.