A Better Fit Needed For Life Sales In Banks
Despite strong growth, banks share of life insurance sales appears stuck at about 2% of total life insurance production in the United States, according to industry sources.
At first glance, the sale figures seem respectable. In the first half of last year, U.S. banks sold $646 million in new life premiums, up sharply from $124 million in the first half of 2000, according to data from Kenneth Kehrer Associates, Princeton, N.J.
But a closer look shows that most of those sales were for single-premium policies, a product purchased by wealthier investors, not the middle market customer banks need to pursue to make significant advances in life insurance.
In fact, first-year recurring premium life sales in banks grew from $45 million to only $104 million from the first half of 2000 to the same period in 2004, Kehrer data shows.
“Only about half of consumers we surveyed seem to know they can buy life insurance at a bank,” says Greg Grzywacz, senior bank research analyst for LIMRA International, Windsor, Conn. “This has hardly changed in several years, although consumers who are aware banks sell life insurance have become more likely to consider a bank if they need it.”
Many consumers, too, doubt a bank is the right place to buy life insurance, says Grzywacz. Among their concerns: whether the bank has sufficient expertise and whether the price is competitive with policies offered by career agents.
A few even believe that when a bank offers life insurance, its underwriting the policies, LIMRA found, and that can undermine their confidence in the product.
“Increasing the number of people who understand an insurance company is underwriting bank-sold life insurance is likely to grow the number who would be willing to buy it from a bank,” says Grzywacz.
“A bank is a totally different environment than the typical career agency in the length of time the advisor spends with the customer,” adds Greg Vacca, a partner with CoreLINK Group LLC, Sedona, Calif., a third-party marketer that helps banks sell life insurance. “The average bank appointment is a single one-hour appointment vs. two, two-hour appointments for an agent.”
Most insurance in banks is sold by investment reps, whose primary business is the sale of investment products, Vacca adds. “So, when it comes to insurance, the first big obstacle is they dont know what to sell: term, a wealth-transfer product, or whatever. The paperwork is different, too. So, reps just stay away from it.”
“A lot of bank reps dont sell life insurance because after they take an application, it goes into a back room, and then they cant keep track of it,” says Richard Starr, chairman and CEO of the Financial Institutions Group, a consulting firm in Sammamish, Wash. “And the not-taken rate is high because it just takes too long to process.”
For banks to break through and capture a significant slice of life sales, a number of changes need to happen, experts agree. Banks and insurers need to work together to:
Develop co-branded products and services. Although federal rules mandate that banks emphasize insurance is not a guaranteed bank product, that shouldnt stop them from conspicuously sharing a brand identify, says Grzywacz.
A recent LIMRA study found that consumers seem to be more receptive to buying life insurance at their bank if they know a life insurance company is manufacturing it, he notes. “It would help if banks made a bolder effort to publicize their insurance partners,” Grzywacz concludes.
Simplify the bank sale. “Banks have to find a way to continue to work with their life insurance partners to make the sale more transactional, to simplify sales to make them quicker,” he says.
As an upshot of co-branding, Grzywacz believes many banks might need to reduce the number of carriers they work with.