Bank Sales Of Life Insurance Gained Momentum In First Half

Consequently, banks increased their market share of U.S. life insurance sales to 1.8%, a two-thirds increase over the first half of last year. While still small, bank life sales are becoming increasingly important. Last year, banks accounted for 11% of the increase in life sales from all channels. So far this year, the growth in life sales in banks has helped to offset the decline from other channels.

More encouraging signs are provided in the just released 2000/2001 Kehrer-LIMRA Bank Life Sales Study. The typical bank had new premium from its life sales business of $397,618 per billion of bank retail deposits.

In analyzing bank sales performance, we use measures of customer penetration such as premium per billion of bank retail deposits. This helps us to analyze how well a given bank is taking advantage of its insurance selling opportunities. It makes sense to assess banks performance relative to the size of their customer or deposit base.

Using this measure, we found mid-sized banks have much higher life penetration than the largest banks.

Regional banks (with $7 billion to $12 billion in retail deposits) produced new life premium of $849,151 per billion of retail deposits. Thats more than twice the average bank and almost seven times the deposit penetration of the mega banks that have retail deposits greater than $30 billion.

The super-regional banks (with retail deposits in the $12 billion to $30 billion range) also have above-average deposit penetration, but super community banks (with $2 billion to $7 billion in retail deposits) also outperform the mega banks, with 2.4 times their deposit penetration.

In all, 51 banks, collectively accounting for 50% of all bank life insurance sales, participated in this years study. The average bank studied has been selling life and health insurance for 4.5 years.

The study found that deposit penetration improves as a bank gains experience selling insurance. Those that have been selling life and health insurance for over seven years have an average new life/health premium of $1.7 million per $1 billion of bank retail deposits, 3.4 times that of banks that have been selling life for four to seven years, and almost eight times that of banks with under four years of experience.

But while this learning curve is encouraging, it is undoubtedly not steep enough for most banks management. While banks are making good progress in building their life insurance sales, they clearly will have to learn how to ramp up deposit penetration faster.

Kenneth Kehrer is head of Kenneth Kehrer Associates, a Princeton, N.J., consulting and research firm. Brad Powell is president of the institutional marketing group of Jackson National Life, a co-sponsor of the Kehrer-LIMRA Bank Sales Study. Further information about the study can be found at www.limra.com or www.kenkehrer.com

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 22, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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