By Robert F. Grieb
The strategic rationale for offering life insurance through banks, thrifts and credit unions is by now well documented.
For consumers, benefits include ease of access and better coordination of financial products and services.
For financial institutions, the arguments include broader product offering, distribution efficiency, and improved customer protection and service.
For insurance companies, its new, efficient distribution partnership opportunities
For agents, its access to new customers, broader availability of products and services, and even enhanced job growth opportunities.
Many good strategies have, however, fallen by the wayside due to poor implementation. This article addresses some of the key factors for success.
There are a variety of life insurance integration models currently in use at financial institutions. They include:
Purchase of an agency. There is increasing activity in this area, although most of it is centered around property-casualty agencies. Banks that have been active for their size in agency acquisitions include Commerce Bancorp. in Cherry Hill, N.J., and Leesport Financial of Reading, Pa.
Adding life insurance to the investment program. Financial institutions are finding this difficult as most investment reps do not embrace life insurance sales. This is due to a combination of product complexity and the relatively long sales and underwriting process.
One institution that is starting to have some success here is PNC Bank in Pittsburgh. Sixty percent of PNC Investments senior financial consultants now sell some wealth-management products. This still represents only about 2% of the total revenue for the firm, however.
Internal specialists. The most widely seen approach currently is the use of internal life insurance specialists. In this model, specialists are called in when a banks investment representative identifies a need for life insurance expertise.
The specialist generally handles the entire sale, but commissions are split with the licensed representative.
Another role of the specialist is that of internal wholesaler, whose task it is to raise investment reps awareness, understanding and acceptance of life insurance. M&T Bank, Buffalo, N.Y., has reported success with this model.
High-end agents. Perhaps the boldest strategy is that being implemented by First Tennessee Bank in Nashville, among others. They have a large number of seasoned, successful life agents and are integrating them into their system.
First Tennessees success with this approach has been linked to its aggressive use of independent financial planning, which has helped to integrate the investment, insurance and banking areas.
Outsource partnership. Many institutions have attempted to form relationships with outside agencies to cross-refer clients when insurance needs are identified. This model has been relatively unsuccessful as each side tends to focus on its own area, and a common bond and understanding are generally not developed.
No matter what model is used, success in offering a wide range of financial products and services requires a true corporate sales culture that will lead to quality referrals, cross-selling, and, ultimately, integrated account selling and servicing across the organization.
A true sales culture requires the following:
Commitment from the top-down and from the bottom-up. This includes employee buy-in, based on an understanding of the requirements and the belief that they can be met.
A true market/customer focus rather than a product silo mentality.
Extensive training, so employees understand "why" and "how"–not just "what" outcomes are expected.
Appropriate compensation that rewards the behaviors that get the desired results.
A clear understanding of individual roles and how they fit together.
The last item is particularly relevant. Referrals are critical to achieving the full potential in a bank sales environment.
Successful referral programs require a corporate commitment based upon understanding and believing in the value proposition for customers, employees and the institution.
This leads to the question: "What is the value of a referral?" And in clear "consultant-speak," I can unequivocally say: "It depends."
