Tuesday, November 17th
9:30 a.m. - 10:30 a.m.

Getting Electronic Shelf Space
in Banks

-- Kevin Crowe, Essex Corporation

"Banks Face Limitations in Insurance Sales"

Banks are making in-roads in selling insurance but there may be limits on the type of insurance product they can handle, the head of a company that markets insurance through banks told insurers.

Kevin E. Crowe, chairman and CEO of Essex Corp., cited research that predicts banks currently sell about $155 million of insurance, an amount that could reach $4 billion in five years. Crowe spoke at "Fulfilling the e-Promise," A.M. Best Co.'s 11th-annual information conference for the insurance industry, held in Boston.

Most of banks' insurance sales come through products such as term-life policies and annuities, which require less insurance expertise. Insurers will soon see more banks offering long-term care insurance, disability income coverage, and some auto and homeowners coverage, Crowe said.

But the middle and higher ends of the insurance markets--policies for more than $100,000 that require medical underwriting and other qualifications--have been out of reach for many banks. Crowe's company markets the SureQuote online, in-branch and direct-mail insurance system that banks can use as part of their in-house sales system.

So far, banks have shown a taste for selling annuities. "Life insurance has been tougher," Crowe said. "Once we figured out the annuity business I wanted to go back and see if we could break the code. Nobody has really done large numbers in that area in the bank arena."

If regulatory barriers fall, Crowe predicts most large banks will quickly acquire insurance companies. "I'm certain of it," he said. "But most of us are convinced they won't know what to do with them once they get them. They want them because most of the large banks in Europe have them."

The biggest barriers to banks selling more insurance may be internal. Many banks' internal culture are designed for order taking, and not for proactive selling. Bank representatives are also reluctant to ask medical questions as part of the underwriting process. But banks are committed to generating more fee income. Typically, banks will sell a $20,000 annuity and could earn $1,000 commission on that sale, Crowe said.

Other challenges in the bank-insurance area include:

• Banks may be willing to partner with an insurance company, but customers are too used to choice and prefer to comparison-shop, Crowe said. As a result, most banks offer a host of mutual funds and savings products; they'll follow the same strategy with insurance.
• Banks look for quick turnarounds, such as a three-day response on mortgage applications. However, larger insurance sales require a doctor's letter, which can take up to six weeks to obtain. Many banks are not comfortable with long time delays, he said.
• Insurers offering through banks need to limit the number of ratings categories and keep applications as crisp and simple as possible. The ideal policy application is a brochure with a tear-off application, Crowe said.
• Banks would like to attract high-end insurance salespersons to sell the most lucrative estate-planning policies. However, trust departments and senior officers often zealously guard their client relationships and often don't give even in-house insurance representatives adequate access to the client.
• Essex in January began rolling out its electronic system to banks and has already been through a host of modifications and upgrades, Crowe said. "We're still starting in this area. We learn a little bit more about this each day."