Banks Hiked Market Share In 2002 As New Life Premiums Surge 42%

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Banks increased their share of the life insurance market slightly last year as new premiums grew by 42% over 2001, reports Kenneth Kehrer Associates, a research firm in Princeton, N.J.

New life insurance premiums collected by banks rose from around $452 million in 2001 to $642 million last year, Kehrer estimates.

Following a slight dip in 2001, banks share of U.S. life insurance sales grew from 1.4% to 1.7% in the first half of 2002, the company says.

Single-premium products continued to dominate bank sales, accounting for some $484 million in 2002, up 47% from $328 million. Recurring premiums totaled $158 million, up 28% from $124 million the year before.

“Universal life continues to be far and away the major single-premium seller for banks. Among recurring-premium products, it was primarily variable insurance that led sales growth,” notes Kenneth Kehrer, whose firm conducts the annual study.

Kehrer found that 74% of bank single-premium sales were UL products, with 22% for whole life and the remainder for variable policies.

Insurers credited their sales success in banks to a variety of causes, ranging from heightened enthusiasm for insurance among many banks to simplified applications and underwriting.

Life sales in 2002 appeared to benefit from banks increasing interest in fee-based income as profits came under pressure from dwindling interest rates, executives note.

Some also cite expanded menus of life products and heightened customer interest in variable policies as important factors in bank sales growth.

To account for the fact that single-premium products are less profitable than recurring-premium policies, Kehrer also calculates weighted premiums, which deducts 90% of the value of single-premium products.

By this measure, bank sales still increased by a respectable 32%, from around $157 million to $207 million.

Most carriers say the sales growth was largely in same-bank sales, although most also increased the number of banks selling their products.

Indeed, one carrier, which asked not to be identified, says it plans to cut back on the number of banks selling its products to improve the efficiency of its bank sales.

Among companies surging well ahead of the industry in bank sales increases was Aviva Life Insurance Company, North Quincy, Mass. (The company had been CGU Life Insurance Company until its purchase last year by Aviva PLC, London.)

Aviva achieved an 855% increase in single-premium sales, from $4.2 million to $61.1 million, which a company executive largely credits to heightened enthusiasm for life insurance by two of its leading bank partners, HSBC Bank USA, a subsidiary of the HSBC Bank, London, and Manufacturers and Traders Trust Company (M&T Bank), both based in Buffalo, N.Y.

Both banks pushed sales of Avivas single-premium universal life product, Wealth Transfer 2000, says Mark McVeigh, Avivas vice president of financial institution marketing.

“It has a simple product design that makes it easy to sell in banks,” says McVeigh. “We also concentrated our wholesaling resources and marketing support on this product line.”

Altogether, Aviva sells through 22 banks. Many are attracted by the companys simple application processes, according to McVeigh.

“We use one application for all of our products, so any agents who were selling term or whole life had the same application for Wealth Transfer,” he explains.

The company sells no annuities, which many life carriers say helped them gain entr?e to banks.

One company that did build bank life sales upon a significant annuity presence is Transamerica Financial Institutions, Minneapolis, a division of Aegon N.V., the Netherlands. The companys new premiums in banks grew 90% last year, from $52.4 million to $99.4 million, all for single-premium products, moving Transamerica from third to second place on Kehrers list of new-premium leaders.

As recently as 2000, Transamerica had only about $19 million in life insurance sales in banks, Kehrer data show.

John Romer, managing director of life insurance for Transamerica Financial Institutions, notes his company has 10 years experience selling annuities through financial institutions.

“Annuities help bank customers accumulate wealth, and through life insurance we can help them transfer their wealth,” Romer says.

The companys emphasis on single-premium insurance, which has a simpler application process than recurring-premium, and its ability to underwrite its own products also helped, Romer notes.

Transamericas 28 wholesalers help banks work out detailed marketing plans to sell life insurance, he says.

The company added six banks in 2002 and now has some 30 institutions, most with assets from $50 billion to $100 billion or more, he says.

Another standout in banks last year was Golden Rule Insurance Company, Lawrenceville, Ill., which increased single-premium sales 855%, from $4.2 million to $40.1 million. Its new premiums doubled, from $15 million to $30.6 million.

Attila Toth, a vice president for Golden Rule, says the company has focused intently on banks for three or four years.

The company offers banks ready-to-roll customer seminars about insurance, backed by its 20 wholesalers, Toth notes. Fourteen of them are outside wholesalers, spending much of their time making joint calls with bank registered reps or helping to educate banks staff or customers about life insurance, he adds.

Golden Rule also uncomplicated its life insurance application. “We dont take 30 to 45 days” to approve an application, Toth says. “We have a 24-hour underwriting time frame. Our placement rate has gone up because the client doesnt have to wait, so we have less buyer remorse,” he says–and hence fewer cancellations.

Golden Rule gathers considerable information from applicants through follow-up telephone interviews after the initial bank contact, relieving bank reps of the need to do so.

“The average case size in banks is not as big as nonbank sales, so you can turn a lot more tickets that way,” Toth points out.

Golden Rule targets as partners the top 100 banks in assets. “Those are the ones that can do volume,” he explains. But the company doesnt turn away smaller banks, he adds.

Among the companys top-selling policies in banks is Asset Care, a single-premium whole life product that a bank financial planner can build around long-term health care, he says. For instance, a death benefit of, say, $200,000, can be converted to a long term care policy.

“Or the client can use it to prepay long term care expenses,” he says. “In other words, its a living policy. If they need $50,000 out of that $200,000, well pay that, and what is not used would pass on to beneficiaries.

“A lot of bank customers have $200,000 to $400,000 in an IRA,” he notes. “They can take out $75,000 for long term care and not have to worry about what happens down the road.”

The leader in life sales in banks in terms of new premiums last year continued to be Liberty Life Assurance Company of Boston, a position it has held for six years.

Last year, its sales grew 19%, from $94.2 million to $112.4 million, largely by building on a strong foundation of bank annuity sales, says Betsy Cosgrove, Liberty Lifes senior vice president and chief marketing executive.

The company added about 15 banks last year and now sells through about 55, she says.

She attributes Liberty Lifes sales growth mostly to its efforts to help banks be more productive.

“The size of the bank isnt as important to us as its commitment” to life insurance sales, she says. “This is an execution business. Execution happens when you have strong [bank] management commitment.”

The companys top bank seller is its Estate Maximizer, a single-premium whole life product, Cosgrove notes.

“Liberty sees itself as a middle-market company and thats why were a good match for banks. Thats their market as well,” she concludes.

Hartford Financial Services Group Inc., Simsbury, Conn., grew its first-year recurring life premiums in banks by 17% last year, from $14.5 million in 2001 to $17 million. At the same time, the company saw a 22% drop in new premiums, from $21.7 million to $17 million.

Companies like Hartford that emphasize equity-based products have been at a disadvantage in the current skittish market, notes Kehrer.

Still, Hartford was able to grow sales in banks last year because it continues to focus resources there, says Bruce Ferris, a vice president of the companys Hartford Life Insurance subsidiary. The Hartford has 190 total account executives, of whom 40 to 50 spend significant time with banks, he notes.

The company also introduced a new program, which it calls Foundations, to simplify the application process.

“In many cases, weve made information-gathering relatively painless for the broker. This has increased the acceptance rate,” says Ferris.

Nationwide Financial Services Inc., Columbus, Ohio, continued to lead in new and weighted premium sales in banks–and, like Hartford, largely without the benefit of single-premium products. Its first-year recurring life premiums rose 26% in 2002, from $30.2 million to $38.1 million.

Almost 100% of those sales were VUL products, says Matt Riebel, president of Nationwide Financial Institution Distributors Agency Inc.

“A lot of our sales growth in banks revolves around the amount of time we invest with individual bank producers to teach them how to sell life insurance,” Riebel says.

In 2002 Nationwide increased its wholesaler force slightly and added a few banks. But that did not play a significant part in the increase, Riebel says.

“As an industry, banks are getting better at selling life insurance,” he says.

He also credits the increase to Nationwides leadership position in other insurance-related businesses, particularly annuities, offshore insurance and retirement plans.

Another new Kehrer study of third-party marketers selling through banks found a number experienced falling sales last year in investment products, while one dropped off Kehrers list of top-ranked firms entirely.

David Weymouth, president of third-ranked Talbot Financial Corp., Albuquerque, N.M., noted sales of mutual funds were down.

“Its been such a lousy equity market for the past few years that few banks or brokers, in general, have seen sales increases in mutual funds or equities. People are looking to more risk-averse investments like fixed annuities,” he says.

“The first three quarters of 2002 were very strong for fixed annuity sales. At the end of the year, with interest rates dropping, the attractiveness of fixed annuities declined a bit but were still strong even in the first quarter of 2003.”

Ranked by investment products as a whole, Independent Financial Marketing Group Inc., Purchase, N.Y., led among TPMs, increasing sales by 60%, from $4.3 billion to $6.9 billion.

The main surprise among bank TPMs was that one of the mainstays of the industry dropped off Kehrers list entirely last year.

BankMark Inc., Morris Plains, N.J., a subsidiary of Mellon Financial Corp., Pittsburgh, had been the number three TPM in banks in 2001.

Last year, its sales slumped, largely due to the loss of two important customers: U.S. Bancorp, Minneapolis, and Fleet Boston Financial, Kehrer notes.

A U.S. Bancorp spokesman acknowledges that the company recently absorbed many operations of its Firstar Bank subsidiary, a BankMark client that it recently acquired, thus eliminating the need for outside marketers.

A BankMark spokeswoman declined comment.


Reproduced from National Underwriter Edition, May 19, 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.