Both banks and carriers seem to be in closer agreement about how life insurance should be sold in banks, a study by the American Council of Life Insurers concludes.
Since 2003, when ACLI first looked at banks’ insurance sales practices, life insurers have sharpened product training in financial institutions and cultivated high-level contacts with banks, according to consultant Carmen Effron, Weston, Conn., who wrote the study report.
“In the 2003 study, there was a huge gap in the amount of training banks were asking for and insurers were providing,” Effron says. “There was no big gap this year.”
On a five-point scale, both insurers and banks rated training at around 3 in importance in 2005, compared to 2003, where banks rated training at 2.7 and insurers rated it at 3.6.
The newer study found banks craving customer service and compliance training the most, while insurers emphasized product training the most, followed by customer service.
Effron says one of the key recommendations she would make as a result of the study findings was that banks train their representatives to engage in life-stage profiling of bank customers.
Under this approach, reps would sell financial products of all kinds, including insurance, to customers based on such factors as whether they are just starting a family or preparing for retirement.
The life-stage approach is simple for bank reps to grasp and put into practice, Effron explains. “If you are going to keep things simple for bank representatives, give them tools that make it easy to have this conversation with customers.”
Another notable finding of the study was a significant reduction in the past two years in the number of carriers banks use.
In 2003, 41% of banks worked with fewer than 10 insurance companies, vs. 55% in 2005, the study found.
Among insurers, 31% had one to five bank partners in 2005, although on the other extreme, 27% worked with over 50 banks.
“There seems to be growing awareness on the part of successful programs that they get better results with fewer partners rather than more,” observes Michael Lovendusky, ACLI senior counsel. “They find they can obtain greater focus and commitment by narrowing the number of partners.”
ACLI also found a notable change in the reasons banks and insurers want to do business with one another.
In 2003, for both sides, it was all about producing more fee income. This year, banks and insurers agreed the No. 1 reason to distribute life insurance was to build and retain customers. Tied for second place for both sides: providing one-stop shopping for financial services and producing fee income.
More than 66% of both sides agree most bank customers are either unaware or barely aware their bank sells insurance, ACLI found.
Many banks faulted insurers for failing to provide enough marketing support–although insurers strongly disagreed.
Both sides determined, however, that developing a sales structure for all financial products, including insurance, was the most effective marketing approach for banks. They also gave high grades to banks buying an agency and integrating it into their operations.
But they disagreed strongly on the efficacy of forming joint bank-insurer ventures. Insurers put that tactic in second place as an effective marketing tool, with a score of 3.5 on a five-point rating scale, while banks ranked it sixth, at 2.4.
Both sides differed on who should sell the insurance. Banks favored their own investment reps, while insurers put those reps second, after agents in the branches.
The biggest disparity was in the two sides’ views of the efficacy of agents working with trust and private bankers. Banks placed this tactic second, while insurers put it in sixth place.
The least effective salespeople in banks, both sides agreed, were platform sales reps, which banks rated 2.3 and insurers rated 3.3.
Since 2003, both sides drew significantly closer on their views of the help banks needed from insurers with various legal compliance issues, such as for marketing, customer privacy and complaint handling.
The biggest difference was over banks’ need for help in complying with state licensing mandates. Insurers gave this a score of 3.1, meaning banks relied on them significantly. Banks, however, scored this need at only 2.1.
Asked why they picked insurance companies as partners, banks cited financial ratings as most important, with an average score of 4.5, along with timely underwriting decisions and company reputation, both scored at 4.1.
For insurers, the biggest reasons to pick a bank as a partner were a good relationship with the bank’s senior management and the high placement of insurance sales as a branch goal, both rated at 4.1.
The study shows both banks and insurers need focus and commitment to make their joint programs work, says ACLI’s Lovendusky.
“The results of the research indicate the most successful programs are where there’s a commitment by senior executives of both the bank and insurance company,” he says. “It needs a sustained commitment over time, not just at the beginning. That translates itself into a focus for both participants that makes it work and overcomes obstacles.”
The study, “Bridging the Cultural Divide Between Banks and Life Insurers,” polled executives from 48 banks and 30 life insurers.
The study’s author says a key recommendation would be that banks train their representatives to engage in life-stage profiling of bank customers