Magazine article American Banker

Insurance: Banks Mellowing on Property/Casualty Sales

Magazine article American Banker

Insurance: Banks Mellowing on Property/Casualty Sales

Article excerpt

Nationwide Mutual Insurance Co.'s announcement last week that it would start selling property/casualty insurance through banks comes as banks are starting to drop their resistance to auto and homeowners insurance.

"It's a natural fit from the insurance agents' perspective," said Carl Formato, president of Washington Mutual Insurance Services. "We want to create as many relationships with the customer as we can."

Mr. Formato's agency, which is owned by Washington Mutual in Seattle, sells homeowners insurance and plans to test-market auto insurance in the second half of the year. Nationwide, which plans to target banks in the West and Midwest, has not contacted Washington Mutual, Mr. Formato said.

A number of large banks-including BankAmerica Corp., First Union Corp., and First Chicago NBD-have begun to sell property/casualty insurance over the last couple of years. All three offer products from The Hartford.

As banks grow more confident that they can succeed in the insurance business, they are overcoming fears that property/casualty insurance will bring them customer relations headaches.

They had feared losing bank customers because some policyholders may feel they got an unfair settlement on a home or auto claim, said MaryAnn Godbout, an assistant vice president at Conning & Co., a Hartford, Conn.- based insurance research firm.

But the potential is too great to ignore, she said.

"Banks are looking for a new business opportunity," Ms. Godbout said. "I think banks might be more successful selling property/casualty than selling life because everyone needs it."

For 1996, banks' sales of property/casualty insurance accounted for less than 1% of the $271 billion market, compared with about 3% of the $10 billion market for life insurance, according to Kenneth Kehrer Associates, Princeton, N.J.

Mr. Kehrer said he was not concerned about the "disgruntled customer" dilemma and predicted that customers would be able to distinguish the underwriters from the bank.

Washington Mutual's homeowners insurance program, which generates $20 million in premiums a year, has gone smoothly, he said. …

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