Changes Needed To Increase Insurance Sales By Banks: Study

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A new study concludes that life insurers need to do a better job of helping bankers fit life insurance sales into their daily routine.

The report, sponsored by the American Council of Life Insurers, Washington, offers recommendations from bank and insurance executives and other experts concerned that life insurance sales in banks have not grown as robustly as was expected 5 years ago.

The recommendations grew out of a series of workshops for bankers and insurance executives that ACLI sponsored last year.

Among the concerns that workshop participants raised was a continuing failure by banks to integrate life insurance products into their sales processes and a persistent inability of both banks and insurers to understand each others business.

Carmen Effron, a consultant and author of the study, says the recommendations are aimed at getting both sides to collaborate more closely in reaching middle-tier and emerging-affluent bank customers, seen as potentially the most profitable.

However, the study concedes there may be inherent conflicts in the way banks and life insurers do business.

“The insurance underwriting process and the transaction-oriented nature of the sale at the bank branch often can be at odds with each other,” the study states. “For this reason, it is more incumbent upon the insurer to change processes to support the bank distribution model…than expecting the bank to fit into the insurers process.”

Among the studys suggestions: more joint business planning between life insurers and banks; insurers helping bankers better understand the profits that can be earned on life insurance; and banks considering making insurance a stand-alone business within their organizational structure.

Effron notes that both banks and insurers had hoped that sales would blossom following enactment of the Gramm-Leach-Bliley Act of 1999, which removed restrictions on bank sales of insurance. So far, that hasnt happened.

“Insurance companies have to be willing to be more flexible to continue to work with banks,” Effron said in an interview. “Banks do things really well if that involves small transactions, and they have their systems and procedures to do that well. Insurance companies must be willing to fit into that structure better than in the past.”

Bank revenue from life insurance stood at an average of only $1.70 annually per bank-customer household, according to a study by LIMRA International released early last year. Thats a figure that disappoints both banks and insurers, industry experts note.

Michael D. White, a bank-insurance consultant in Radnor, Pa., says ACLIs study has some helpful suggestions but also offers some he believes would be difficult to implement. For instance, the study suggests partnerships of bankers and insurers to share the costs of sales and product training for bank producers. White thinks implementing that proposal might take some time.

“That probably wouldnt immediately impact life insurance sales,” he says. “Instead, banks have to go back to some basic blocking and tackling in developing sales support and trainingcovering stuff like making the offer, prospecting, learning how to ask questions, those kind of things.”

In the long run, White believes, the best sales training involves the salesman watching his boss or mentor in front of the client. “Thats the kind of sales support thats needed in banks.”

Andrew Singer, head of the Bank Insurance Marketing Group, Mamaroneck, N.Y., says ACLIs findings agree with his own firms recent studies that found banks think sales training is a leading barrier to increased insurance profits.

The underlying problem, Singer believes, is that life insurance typically has a longer sales cycle than bank brokers are used to. For that reason, it can be difficult to get investment sales specialists to focus on life insurance, he says.

“Most banks are still taking their existing sales force of dedicated brokers and laying insurance on them among other tasks,” Singer points out. “The big problem is its a much more difficult product to sell than mutual funds and annuities. Sometimes you have to meet with a client 2 or 3 times, and then you may not get approval from underwriting for another 2 or 3 weeks. So, the tendency among bank reps is not to bother.”

Aside from more education, Singer thinks banks need to do a better job of establishing life insurance sales goals for their Series 7 reps.

“Its the only way you get them off their fixation with transaction-type products,” he says.

Another consultant, Kenneth Kehrer, Princeton, N.J., argues that the study has to be considered against the backdrop of growing life insurance sales in banks.

“The fact is that bank sales are growing, and industry sales havent been,” he says. “Despite the problems banks have had selling insurance, they are gaining market share.”


Reproduced from National Underwriter Edition, January 6, 2005. Copyright 2005 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.