Big Insurance Companies Warm to Banks as Places to Boost Their Flagging Sales

By Kapiloff, Howard | American Banker, April 30, 1996 | Go to article overview

Big Insurance Companies Warm to Banks as Places to Boost Their Flagging Sales


Kapiloff, Howard, American Banker


After years of shunning banks, some of the nation's largest insurance companies are gearing up to peddle their wares in the bank marketplace.

The Equitable Cos. is developing a unit to sell its insurance through banks and plans to start signing up bank clients next year. Prudential Life Insurance Company of America has brought in consultants to study the bank channel and is expected to launch a significant bank program soon. And Massachusetts Mutual Life Insurance Co. is also said to be looking at sales through banks.

Unlike some rival insurance companies, these household names have long avoided courting banks for fear of angering their own sales forces. But with life insurance sales stagnating, they are eagerly eyeing banks, brokerage firms, and financial planners.

"Their core business of selling life insurance through agents is floundering, and they are looking to banks as their saviors," said Kenneth Kehrer, a consultant in Princeton, N.J.

A recent Supreme Court decision is giving insurers another reason to look at the bank channel. Last month, the high court ruled that states cannot block insurance sales by banks in small towns.

The ruling is widely expected to stimulate new interest in insurance sales among banks. Indeed, banking trade groups have begun crafting guidelines for such sales. (See related story, page 2).

The legal breakthrough, coupled with sluggish sales by traditional life insurance agents, are an opportunity banks hope to exploit. Some bankers say they are in a position to demand both fat sales commissions and substantial marketing support from the insurers whose products they sell.

"Banks will expect more because they have the customer base to support it," said Joseph Alberti, president of Milwaukee-based bank Firstar Corp.'s insurance subsidiary.

Selling insurance through banks is nothing new. But to date, most insurers in the bank market have been smaller players who relied heavily on other companies' sales forces to pitch their wares.

These latest entrants, by contrast, have large fleets of "career agents" - salespeople who are under contract to promote a specific insurer's products.

The risk of sparking the ire of these career agents - the backbone of their sales efforts - has kept some of the largest insurers from aggressively marketing through banks. Indeed, Prudential, along with Metropolitan Life Insurance Co., dropped seminal bank programs in the early 1980s because their agents cried foul.

"It's been very hard for these insurance companies to get themselves in a position to work with banks, because the agents see banks as formidable competitors," Mr. Kehrer said.

But with sales stalling, insurance companies are more willing to risk angering their agents. According to the Life Insurance Marketing Research Association, 12 million new life policies were sold last year - a 29% decline since 1982. Sales have remained flat at about $9. …

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