A Better Fit Needed For Life Sales In Banks

By Trevor Thomas

Despite strong growth, banksí share of life insurance sales appears stuck at about 2% of total life insurance
production in the United States, according to industry sources.

At first glance, the sale figures seem respectable. In the first half of last year, U.S. banks sold $646 million in new life premiums, up sharply from $124 million in the first half of 2000, according to data from Kenneth Kehrer Associates, Princeton, N.J.

But a closer look shows that most of those sales were for single-premium policies, a product purchased by wealthier investors, not the middle market customer banks need to pursue to make significant advances in life insurance.

In fact, first-year recurring premium life sales in banks grew from $45 million to only $104 million from the first half of 2000 to the same period in 2004, Kehrer data shows.

"Only about half of consumers we surveyed seem to know they can buy life insurance at a bank," says Greg Grzywacz, senior bank research analyst for LIMRA International, Windsor, Conn. "This has hardly changed in several years, although consumers who are aware banks sell life insurance have become more likely to consider a bank if they need it."

Many consumers, too, doubt a bank is the right place to buy life insurance, says Grzywacz. Among their concerns: whether the bank has sufficient expertise and whether the price is competitive with policies offered by career agents.

A few even believe that when a bank offers life insurance, itís underwriting the policies, LIMRA found, and that can undermine their confidence in the product.


"Increasing the number of people who understand an insurance company is underwriting bank-sold life insurance is likely to grow the number who would be willing to buy it from a bank," says Grzywacz.

"A bank is a totally different environment than the typical career agency in the length of time the advisor spends with the customer," adds Greg Vacca, a partner with CoreLINK Group LLC, Sedona, Calif., a third-party marketer that helps ban
ks sell life insurance. "The average bank appointment is a single one-hour appointment vs. two, two-hour appointments for an agent."

Most insurance in banks is sold by investment reps, whose primary business is the sale of investment products, Vacca adds. "So, when it comes to insurance, the first big obstacle is they donít know what to sell: term, a wealth-transfer product, or whatever. The paperwork is different, too. So, reps just stay away from it."

"A lot of bank reps donít sell life insurance because after they take an application, it goes into a back room, and then they canít keep track of it," says Richard Starr, chairman and CEO of the Financial Institutions Group, a consulting firm in Sammamish, Wash. "And the not-taken rate is high because it just takes too long to process."

For banks to break through and capture a significant slice of life sales, a number of changes need to happen, experts agree. Banks and insurers need to work together to:

Develop co-branded products and services. Although federal rules mandate that banks emphasize insurance is not a guaranteed bank product, that shouldnít stop them from conspicuously sharing a brand identify, says Grzywacz.

A recent LIMRA study found that consumers seem to be more receptive to buying life insurance at their bank if they know a life insurance company is manufacturing it, he notes. "It would help if banks made a bolder effort to publicize their insurance partners," Grzywacz concludes.

Simplify the bank sale. "Banks have to find a way to continue to work with their life insurance partners to make the sale more transactional, to simplify sales to make them quicker," he says.

As an upshot of co-branding, Grzywacz believes many banks might need to reduce the number of carriers they work with.

"People often look to Europe for success with bancassurance," he says. "Because the bank and insurer are often both parts of conglomerate there, you wind up with banks selling only one insurance company. Having fewer partners just simplifies things so greatly, and I think thatís overlooked."


Sell the agent. One of things middle market consumers are wary about is the bankís expertise, Grzywacz says. "In addition to advertising and plugging the availability of life insurance, the bank needs to market the agent," he adds.

Automate the process. Another barrier is the length of time it takes to get an insurance policy approved. Bank customers are likely to be familiar with annuities and mutual funds, which require no waiting, observers point out. Buying life insurance, which may take weeks to process, is not something they get used to quickly.

"The bank has to concentrate on simplifying the cumbersome paper process," says Starr, who believes technology is coming to the rescue with solutions that werenít available even a year ago. New software and online platforms promise to automate, streamline or eliminate paperwork and put control of application tracking in the hands of bank advisors, he says.

These applications let the advisor fill out an application on screen, send it straight to underwriting, and use artificial intelligence to help screen the applicant and to eliminate submissions that are unlikely to be accepted.


Vacca, whose firm provides its bank clients with a system for processing life applications online, predicts such technologies will encourage bank sales managers and reps to sell more life insurance by making it easier to do so.

He claims that an automated system like CoreLINKís can be 90% accurate in predicting whether an applicant will qualify for a life policy. So, needless applications are reduced, while those submitted are likely to be processed quickly.

Underwriters say half of business they get from bank reps is incomplete, Vacca says. When advisors leave something off an application or check the wrong box, they have to go back to the customer and get an amendment signed. Such delays often kill the sale.

"Our goal is to have fully underwritten products written in as little as 15 days instead of as much as 8 weeks," says Vacca. "Reps donít want to sell if it takes 90 to 100 days, and then they find out it was declined. Insurance companies donít want to take it that long, either, because it increases the number of not-takens. By shortening underwriting, the number of taken policies goes up significantly. Itís a matter of having complete, accurate information."

Using CoreLINKís system, for instance, one insurer can approve a $250,000 term life policy within 15 minutes right in the bank, Vacca says. Costlier or more complex life products may take only 4 or 5 days to approve because of the efficiencies available through online automation.

Automation also assures that applications are complete and error-free. And it helps satisfy compliance needs. CoreLINKís system leads the advisor step by step through all forms, including state-mandated suitability disclosures required for a given customer.

Perhaps the biggest advantage of an automated system is its ability to provide real-time tracking of business, Vacca says.

"A lot of bank sales managers donít encourage reps to sell life insurance because the sale takes so long, and they never know its status," says Vacca. "They get a daily report on sales of mutual funds and annuities, but on insurance sales, they are lucky to see it monthly."

LIMRAís Grzywacz thinks banks should focus on selling insurance to younger, less affluent consumers in the hopes of retaining their business as they mature.

"Banks are good at segmenting their markets," he says. "They ought to take advantage of the work they do to hone in on younger consumers."

One tactic that might pay off: free financial planning. Grzywacz sees this as more of a service, not a sale, but one that could lead to more sales of financial products, including life insurance. Financial planning software is readily available that would allow bank advisors to develop a usable plan in a short time for a customer, he notes.

Mid-market consumers told LIMRA theyíd be more comfortable buying life insurance from an agent than a bank. Getting them to see things differently requires action by both banks and carriers, Grzywacz says.