Banks Built On Small Life Market Share While Staying Strong In Annuities In 03

Guaranteed minimums on income benefits, withdrawal benefits and accumulation benefits all boosted variable annuity sales to bank consumers, he notes.

"Its generally acknowledged that bank customers are more conservative, but todays variable annuities give upside participation with guarantees that minimize the downside," Fenton says.

Banks love for upfront commissions also played a role in VAs resurgence, he adds.

In life insurance, banks saw balanced growth, with about half of sales coming from banks that already sold life products and half from new banks entering the insurance game, Kehrer reports.

"Banks continued to inch up in the first half to over 2.5% market share, compared to 2002s 1.7%," says Kehrer.

"We saw significant growth in recurring-premium products, so we are getting some balance against single-premium life," he adds. "In 2002, all the growth was in single premium."

Despite the growth, banks are still not a major channel for life insurance products, Kehrer acknowledges.

"Growth has been disappointing when you look back at the last decade, and banks are still dissatisfied," he says. "But they are making progress and have grown nicely over the past couple of years, in contrast to the general life market, where there has been virtually no premium growth."

Still, predictions widely heard 20 years ago that banks would have 25% of the life insurance market seem drastically off target, he concedes.

"Banks have been impeded by the difficulty of selling insurance compared to investments," he says.

Banks that hired agents found that approach to be an expensive way to sell life insurance, compared to the small amount of customer penetration they achieved, he says. In general, banks have come to realize that its better to train their own people in how to sell specific kinds of products to specific kinds of customers.

"Banks are still figuring out which people to train on what products," Kehrer says.

Keith Dall, a bank insurance expert with Milliman USA, Seattle, believes bank life insurance sales are making progress.

"In terms of products, it is still the simplified guaranteed issue term and whole life insurance product that are driving sales in banks," he says. "The key is the product has to be a simple one that banks can turn around very quickly.

"Life insurance still needs to be sold, and that is the difficulty banks have with it," Dall says. "Insurance companies need to continue to train bank employees at the point of sale and to continue to increase the face amount of products."

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 19, 2003. Copyright 2003 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.