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.

Many customers like the fact that John Burnham Insurance now has a big, well-known, highly regarded parent company, adds Bradley Orr, President of John Burnham Insurance Services.

But “Union Bank is not selling employee benefits directly,” Orr says. And the broker gets only 10% of its new benefits business as referrals from the bank.

Experts say banks have to scrape for market share just like everybody else looking for benefits business. In part, thats because capital is not everything in this business. Besides, plenty of the existing players already have relatively easy access to capital.

Burnham Insurance, for example, could afford to offer modern, Web-based benefits administration systems even before it had a publicly traded parent.

Besides, owners of midsize benefits brokerage firms can sell their businesses to any number of public companies, other than banks, that are building financial services distribution. Banks also have to compete with those big players for the talents of experienced agents who know how to sell and service benefits accounts.

At BB&T, bankers come up with referrals for benefits services by asking customers what they really need, Pruett says. Many customers then refer prospects to the banks benefits specialists.

Because brokers tend to offer similar products for similar prices, the broker that seems likely to offer the best service wins the customer, Pruett says.

Wachovia Corp., Charlotte, N.C., is aggressive in bringing bankers into the benefits sales process. Wachovia, which focuses on selling retirement services, estimates its typical banker works with about 200 to 250 businesses.

Benefits marketing experts help Wachovias bankers sift through their customer lists for the top 30 prospects, says Scott Joyner, the national sales manager for small business plans at Wachovias retirement services unit.

“Probably only 5 of those customers are actually going to have a retirement plan,” Joyner says.

Wachovia bankers use post cards, telephone calls and letters to implement a “drip” marketing campaign to their lists of top prospects.

The widespread belief that bankers make poor benefits sales reps “doesnt apply here,” Joyner says. “Our bankers are supremely motivated.”

Wachovia uses score cards and other incentives to overcome any sales inhibitions.

Most of its retirement plan sales are closed with face-to-face client meetings. The Wachovia banker who “owns the relationship” and a financial advisor with a Series 7 license will make a joint presentation in the clients office, Joyner says.

Because of customer segmentation and outreach efforts that takes place before the appointment, the banker and the financial advisor have at least a 60% chance of making the sale while they are in the office, Joyner says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 5, 2004. Copyright 2004 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.