Mistakes That Keep Banks from Meshing with Insurers
Wade, Alan, American Banker
Banking and insurance executives generally agree that a successful merging of the two industries would be a marriage made in heaven.
Banks offer solutions to insurers' distribution problems, while insurance seems a logical replacement for many of the dwindling traditional banking businesses.
So why do banks still account for only a small portion of life insurance sales? There are a variety of reasons, caused chiefly by mistakes made in both industries. Here are five of the most common mistakes by banks:
Short-term thinking. Many banks have dipped a toe into the waters of insurance sales, then withdrawn it a short while later because the business remains unprofitable. Everyone from the CEO on down needs to make a long-term commitment and stick with it. Otherwise, forget about insurance sales.
Failure to think strategically. Entering the insurance business purely for the revenue does not make a lot of sense. There may be other product lines that offer more immediate revenue potential and fewer headaches.
However, the truth is that banks are no longer in the banking business; they're in the "financial services" business. They are competing for a customer's entire pocketbook. Banks need to satisfy their customers' insurance needs, or insurance companies may swoop in and address their banking needs.
Putting a banker in charge. Though selling insurance isn't brain surgery, a certain level of knowledge and experience is nonetheless critical in successfully building the business.
One client of ours was dissatisfied with the results of a year-old effort to sell insurance. The problem: A top commercial lender had been placed in charge of the insurance effort, and he was out of his element. He struggled with evaluating the right recruits, understanding unfamiliar products, and negotiating with insurers -- all of which would have been second nature to an insurance expert with the appropriate experience. …