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If banks are to pump up their slim share of the life insurance market, insurers must improve their point-of-sales and training support for bank staffs, say researchers who recently studied banks lack of success in the market (see NU, Oct. 20, p. 8).

The study, sponsored by the American Council of Life Insurers in Washington, found among other things that 49% of banks selling life insurance sold fewer than 1,000 policies in 2001.

Banks have yet to make a big splash in the life insurance market, despite the enactment of the Gramm-Leach-Bliley Act of 1999, which did away with a number of legal barriers to bank sales of insurance and other financial products.

Bank sales accounted for only 2.5% of the total U.S. life insurance market in the first half of 2003, according to research by Kenneth Kehrer Associates, Princeton, N.J. This was up from 1.7% in the first half of last year.

Although banks and life insurers seem in relative agreement about what they need to do to spark sales, the ACLI study found a number of areas where the two industries need to work more closely together.

One key issue found by the study was that of insurer-provided training for bank platform and licensed personnel.

Although banks and insurers both ranked such training high in importance, banks rated their satisfaction with insurer training relatively low, giving it 5.4 on a scale of 10. Insurers, on the other hand, gave themselves a 7.3 rating for training.

In the words of ACLI, “Banks are not relying on the insurers capacity to provide training and licensing, and they are only partially satisfied with what they are receiving.”

Banks rated the adequacy of training that insurers provided for new product rollouts at 5.9, compared to 8.1 by insurers, an “extremely significant” gap of 2.2, ACLI says. The perception gap over the amount of training offered was just a little lower for existing products, with banks rating the adequacy of insurer-provided training at 5.9, as against 7.5 by insurers.

Banks showed the least satisfaction with customer service training, with 53% thinking this was adequate to considerable, compared to 81% of insurers.

“Banks say they would like to do more and even use third parties [to provide training],” says Carmen Effron, president of the consulting firm, CF Effron Company, LLC, Westport, Conn., a coauthor of the ACLI study.

The problem for banks is finding the time to teach their people, Effron says. She points out life insurance is just one of many financial products that banks sell.

“Theres a shelf space issue,” she says. “Theres so much training banks want their people to go through. Insurance adds another level of complexity.”

Insurers can reduce the gap by making sure banks clearly understand how much time will be needed to train bank producers, Effron advises.

“Then its up to the banks to say they can or cant accommodate that,” she says.

When there is an honest, upfront discussion about what is needed to meet production goals, expectations on both sides will be closer to reality, Effron says.

Michael Lovendusky, ACLIs senior counsel, says insurers may be able to cut the training logjam by reducing the amount of compliance training they offer to banks. This training is designed to ensure that bank staffs understand the legal issues in selling insurance.

But banks feel they can handle that end of training on their own, he says.

The survey found that banks rated compliance training at 4.6 in importance, while insurers scored it 6.3, a fairly significant gap. Large banks (assets above $10 billion) ranked this type of training even lower, at an average of 3.7, compared to 5 by smaller banks.

“Banks want less compliance training. They feel they can do it themselves,” says Lovendusky. “Insurers feel they must provide such training, lest they be exposed to liability.”

Another issue uncovered by the survey was a gap in the two sides views of point-of-sales support.

Banks saw product integration at the point of sales as relatively important, rating it at 7.5, compared to 6.8 by insurers.

However, banks were relatively disappointed with product integration, giving it a 4.6 on the satisfaction scale, compared to 6 by insurers.

“Individual bank personnel have to understand where the insurance product fits in the overall needs of the customer and also understand what the requirements might be [for clients to qualify] for insurance products,” Lovendusky says.

Products that can be issued instantly are the easiest to understand, he adds. Integration of more complicated products is harder, because bank personnel have to learn where the product fits in with clients needs.

“The benefits to consumers are more likely from complicated policies, so point-of-sales integration has to go beyond training to include technical systems or underwriting systems that can guarantee an answer in a time period that would be satisfactory to the customer,” Lovendusky says.

Use of technology could, for instance, give bank personnel fast liaison with an insurance carrier staffer who could answer their questions instantly, he suggests.

“Banks say this is important, that the more integrated with us, the better wed like it,” Lovendusky says.

Point-of-sales integration might also include instant commissions for the bank producer, Effron suggests.

“Some insurers cant give commissions on an electronic basis,” she says. “That means there is manual intervention. To me, thats ridiculous. Make it easier for the bank to work with you. Getting commissions in an electronic format is essential.”

Lovendusky says the ACLI study is “a rich study,” but the answers are not there yet. “The next step is to begin discussion by insurance companies and banks about addressing them.”

More effective alliances between banks and insurers are needed, Lovendusky believes.

“Not only are there few marriages, but theres also not enough dating going on,” he concludes.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 14, 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.