Banks increased new life insurance sales by around 15% last year, according to estimates by research firm Kehrer-LIMRA.

That is similar to the sales increase seen in 2005, according to Kenneth Kehrer, who helped direct the study. The firm he heads, Kehrer-LIMRA, is a subsidiary of LIMRA International, Windsor, Conn.

Despite the growth, bank customer penetration in terms of sales per household remains low for life insurance products, notes Kehrer.

“The typical bank selling life insurance produced only $1.33 in new life sales commissions per customer household of the bank,” he says.

The 73 banks in the study reported an average profit margin for life insurance sales of 42% on average, compared to a margin in the typical bank investment sales program of 24% last year.

Most banks focus on only 1 or 2 routes to sell life insurance, such as financial consultants, licensed platform bankers, direct response methods, retail agents, advanced agents or referrals to outside agencies. However, some are expanding the number of such channels they use, the study found.

For instance, 53% of banks reported using only one method of distribution for life insurance last year. Yet 27% used more than 2 methods, up from 20% the year before.

Advanced agents, who focus on estate planning and business succession solutions, remain the most productive distribution channel for banks, generating more than $344,000 in first-year life commission per agent on average, Kehrer-LIMRA found.

Sales force compensation consumes 40% of first year revenue and 32% of total revenue in the typical bank life sales program.

The study concluded that banks can do much to improve customer penetration for life insurance by expanding into new distribution channels.

The research suggests a typical bank that uses direct response, platform bankers, financial consultants and advanced agents at the same time would see a 10-fold improvement in revenue penetration for life insurance, said Richard Hotham, vice president for financial institutions, Liberty Life Assurance Company, Boston, a cosponsor of the study.

Other carriers sponsoring the study were Great-West Life & Annuity Insurance Company, MetLife Inc., Nationwide Mutual Insurance Company, Prudential Financial Inc., Transamerica Capital Inc. and VantisLife Insurance Company Inc.