Banks Poised To Take Bigger Bite Out Of Employee Benefits Business
By Allison Bell
Will banks grow up to dominate employee benefits sales?
The consensus seems to be that some banks will do great but that they will have to work for a living, just like everyone else in the market.
The American Bankers Insurance Association, Washington, reports that 21% of the 400 banks surveyed were selling employee benefits in 2002, up from only 14% in 1998.
Some banks say they are having great luck at turning bankers into skilled prospectors for benefits clients. David Pruett, the insurance chief administrative officer at BB&T Insurance Services, Mount Airy, N.C., says, however, he is skeptical that many banks will have success with that strategy.
Pruetts organization, part of BB&T Corp., Winston-Salem, N.C., generates about $50 million a year in benefits commissions.
Pruett says he has deep respect for BB&Ts bankers but contends that, over in the bank, “its a very different sales culture.”
In theory, banks could have overwhelming advantages over other benefits sellers. Many are big, publicly traded companies with easy access to Wall Street capital, and most have strong relationships with businesses in their communities.
For banks with an interest in the benefits market, “I think theres a ton more opportunity,” says Kevin Gannon, president of the Niagara Benefits Group at Niagara Insurance Group, Williamsville, N.Y., a unit of Brown & Brown Inc., Daytona Beach, Fla. “I dont think theyve even scratched the surface.”
Niagara Insurance has attracted attention from a number of banks by creating an employee benefits package that includes major medical insurance, group dental insurance, group life insurance and group disability insurance.
Because bankers are trying to sell so many different products, “we sometimes get lost in the sauce,” Gannon says. His companys package needs “someone in the bank whos enthusiastic about selling it.”
In 5 years, banks could be doing 20 times as much benefits business as they are doing today, Gannon adds.
But despite banks strength in the annuity market, commercial lines of all kinds, including benefits products, account for only 16% of bank insurance sales, according to LIMRA International Inc., Windsor, Conn.
Banks often jump into benefits by buying recognized brokers.
For instance, UnionBanCal Corp., San Francisco, the parent of Union Bank of California N.A., became a big benefits player by acquiring Armstrong/Robitaille Business and Insurance Services, Fullerton, Calif., in November 2001 and John Burnham Insurance Services, San Diego, in December 2002.