Insurance: Broker Helps Pennsylvania Bank Break into the Business

Bryn Mawr Trust Co., a provider of investment management services to residents of Philadelphia's affluent Main Line, has added insurance to its mix.

Executives at the $374 million-asset company, based in Bryn Mawr, Pa., say they are keen on insurance sales despite relatively strict state regulations for banks in the business. Bryn Mawr projected revenues of $500,000 from insurance for this year, according to John G. Daniel, director of the group.

Since opening its Insurance Counsellors subsidiary Feb. 1 under a revenue-sharing arrangement with a local insurance brokerage, Simkiss Cos., Bryn Mawr has taken in $25,000 of revenue from selling various types of policies, Mr. Daniel said. Life insurance has been the strongest seller so far. Policies covering property and casualty, automobile, health, and business liability are also available.

Because setting up or buying an insurance agency would be too costly, Bryn Mawr considered a joint venture strategy before deciding on the alliance. Simkiss provides sales, marketing, underwriting, and processing. Through the brokerage, the bank taps into a network of over 50 carriers-an impossibility if it were on its own.

"With the insurance business, you have to establish relationships with insurance carriers, and that relationship usually depends on volume," Mr. Daniel said.

Mr. Daniel was a principal of Warren, Welsh & Thompson, an insurance brokerage he helped found. He sold the brokerage to USI Corp., where he worked until joining Bryn Mawr in August.

At Bryn Mawr, Mr. Daniel is concentrating sales efforts on the company's "member banking" customers, who are its most profitable. The bank's investment and tax advisory groups are the largest source of referrals to Simkiss, Mr. Daniel said. Investment management for the well-heeled is Bryn Mawr's bread-and-butter. The bank made $7.6 million in trust fee income last year, from a base of $1.7 billion of assets under administration in its trust department.

Even when customers are interested, insurance is no easy sell for Pennsylvania banks. Sales are prohibited on banking floors, so the three people working in Bryn Mawr's insurance group are situated as far away from other bankers as possible.

Disclaimers must be mailed to clients citing that loans are not contingent on the purchase of insurance. Also, a bank must obtain clients' permission before its insurance subsidiary may troll their files for prospects.

"You're not allowed to give any kind of commission or rebate to any individual who makes a referral," Mr. Daniel said, adding that some Bryn Mawr bankers "threatened to become licensed just so they can get something out of this."

The bank has not decided whether that would be a good idea.

"It would make things a lot easier," Mr. Daniel said. But he said that if insurance comes up in conversation during loan negotiations, "there's always the possibility of a squeeze."

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