First Chicago NBD Corp. plans a series of focus groups early next month to assess whether its customers would buy universal life insurance if the bank offered the product.
First Chicago is hoping that clients who are planning to pass annuities, mutual funds, and certificates of deposit on to beneficiaries will transfer their assets into insurance policies, said Karl Keller, vice president for marketing, planning, and technology at First Chicago NBD Investment Services, the bank's broker-dealer.
Such a maneuver would soften the tax bite their beneficiaries would feel when inheriting the money, he said.
If First Chicago's clients are receptive to the bank's pitch, it could signal that life insurance can be sold successfully through the bank channel despite the product's failure to catch on at banks thus far.
"Everyone's been trying to figure out how to crack the life insurance nut at banks," said Mr. Keller.
Indeed, few banks have successfully sold life insurance. The reasons and possible solutions were discussed on Tuesday at an industry conference in New York, titled "Banks and Insurance: Distributing Insurance and Annuity Products Through Financial Institutions," sponsored by Business Strategy Network.
John Philip Sousa 4th, executive vice president for marketing at SunAmerica, the Los Angeles-based insurer, said that as many as 70% of fixed-annuity buyers never tap their annuity investments, but pass them on instead.
The money from tax-deferred annuities is taxed as ordinary income, and that can push the recipient into a higher tax bracket, he said.
But taking money destined for beneficiaries out of annuities, CDs, or mutual funds and putting it in life insurance can bring tax advantages in each case, industry experts say.
Life insurance has not caught on through banks for several reasons, said Mr. Sousa. He cited a lack of training for bank representatives and an aversion to selling a product associated with death.
Additional barriers include banks' failure to properly target likely customers and representatives' concerns that will be delayed because of the lengthy underwriting process, said Mr. Sousa.
Although the biggest banks boast of having a solid life insurance business, banks overall accounted for less than half a percent of the $9.5 billion in new premiums written last year, according to Limra, a Windsor, Conn., trade association for insurers.
Valerie Jordan, president of Jordan & Jordan Associates in Belchertown, Mass., said that as more states lower the regulatory barriers to banks selling insurance, that percentage will grow.
"Insurance is on every banker's lips right now," she said.
Last year, First Chicago reaped $54 million in pretax profit from insurance sales, including credit life, property/casualty, and term, Mr. Keller said.
