Bank Brokers Making Progress In Selling Life Insurance
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Selling life insurance through the financial consultants who sell mutual funds and annuities in bank branches has been an uphill climb, but banks have made substantial progress in the past two years, according to the 1999/2000 Kehrer-LIMRA Life Sales Study.
In 1997, the typical full-service broker working in a bank environment produced $2,500 in gross commission revenue from sales of life and health insurance, only 1% of the financial consultants annual production. Two years later, the typical broker generated life sales revenue of $8,379, 3.4 times the 1997 level. Life sales accounted for over 3% of the brokers annual production, three times the revenue contribution two years earlier.
The Kehrer-LIMRA analysis is based on 43 banks that are broadly representative of the size and geographic dispersion of banks and credit unions that are selling life and health insurance, including 18 of the 20 largest bank life insurance programs.
The average life/health productivity in 1999 was twice the median level and slightly higher than the top quartile, indicating that the average productivity was pulled up substantially by the performance of a few banks. Indeed, the banks with the highest life/health productivity averaged $57,333 in sales revenue per broker, almost 7 times the life/health productivity of brokers in the average bank.
But broker productivity is only part of the story. For a bank, a more important measure of success is how much revenue from life sales a bank produces for its size. For the most part, banks and credit unions are trying to capture the insurance business of their existing customers rather than selling to the population at large.
A bank can achieve higher sales force productivity by cutting back on the number of sales staff, but that might actually reduce total revenue (and profits). The total sales from a smaller but more productive sales force could be lower than the total sales of a larger, less productive sales force.
Banks want to maximize revenue and income from selling insurance, but maximizing a sales forces productivity does not necessarily result in maximum income. One useful measure of sales performance relative to a banks size is life sales revenue penetration of retail deposits.
