funds and annuities. But as the growth of those investment product assets has begun to trail off, bankers are taking a new look at a very old financial product - life insurance. With evidence showing that traditional life insurance agents find it uneconomical to sell to low- and middle-income Americans, many bankers believe they have a greater place in this business than has been previously demonstrated. "Life insurance is not a silver bullet or a gimme for banks," says Roger R. Ludemann, the head of insurance sales at First Federal Lincoln Bank in Lincoln, Neb. "But it's an excellent relationship product, and the next major step in building fee income." More than a decade after many banks abandoned half-hearted and ill- conceived efforts to step into this business, Mr. Ludemann's words are being heeded by a small cadre of banks, ranging in size from mighty Chemical Banking Corp. to a slew of state-chartered institutions taking advantage of favorable state law. Many see dollar signs behind the fat commissions - 65% or more of first- year premiums - that marketers receive. Others simply want to add another arrow to the quiver of bank services they can provide. All are emboldened by the hope that Congress and the Supreme Court will act in the coming year to broaden insurance powers for national banks. These banks - despite several key loopholes - have faced restrictions in this business. Some in the industry view the sale of life insurance as the next step beyond their traditional core offerings of credit-related insurance. "Life insurance is where annuities marketing was 10 or 12 years ago," says Michael White, a bank insurance consultant based in Radnor, Pa. While many of these bankers are also looking seriously at marketing other lines of insurance - such as property and casualty, and auto - life insurance is viewed by some as the most appropriate for banks. "Life insurance is a more conservative business," says Robert Baranoff, TK, with Limra International, a Hartford, Conn., research and marketing firm. "With other policies, there are constant claims. If someone gets annoyed with the settlement of a claim, it might disrupt their relationship with their bank. And a lot of bankers aren't willing to risk offending a relationship, given the small amounts of money involved." In recent months, bankers have been turning out for educational seminars on marketing life insurance and other policies. They often find themselves outnumbered by representatives with major underwriting firms eager to add distribution outlets for their products. Such companies as ITT Hartford, USLife Corp., Jackson National Life Insurance Co., and American General Life Insurance Co. are eager to sell life insurance through banks. But the stars of these banks-in-insurance confabs are often the small number of bank executives who have made bold moves into the marketing of life insurance. Most banks have similar reasons for entering the life insurance marketing business, but some of the most prominent names in the business have pursued widely divergent marketing strategies. For example, Andrea Martin, the head of Comerica's insurance operation, is building a life insurance business at her Detroit-based banking company with the help of an army of dedicated life reps she recruited almost from scratch. These reps, culled from the ranks of traditional agencies, are selling a wide variety of polices, including variable and universal. By contrast, at Dime Savings Bank, insurance director J. Daniel Keppel is using platform workers to sell plain-vanilla savings bank life insurance, including whole and term life policies. And Chemical has used a leading third-party marketing firm, Bankmark, to build what may be the most profitable bank insurance program in the country. Their stories - as well as those of other banks that have made inroads into life insurance - are detailed in the following pages. Yet bank successes in the marketing of life insurance are few and far between. Banks' share of the life insurance sales in this country is a paltry 1%, according to Conning & Co., a Hartford consulting firm. And a study conducted this year by Kenneth Kehrer Associates found that when the premium value of life insurance sold through banks is measured as a percentage of total retail deposits, the best ratio a bank could muster was a paltry 0.13% Even Mr. White, an unabashed booster of banks in insurance, acknowledges that he has a "tough time coming up with an example of a bank program that I really admire." Moreover, some question why bankers are so eager to hitch their wagons to a financial product that isn't winning any popularity contests these days. The number of new premium dollars has settled in at about $10 billion for the past four years, according to Limra International. Part of life insurance's image problem stems from the belief held by many that insurance - particularly policies with an investment component - isn't a good deal. Too much of a consumer's premium dollar goes to paying off selling agents, so cash value doesn't build up quickly enough in whole policies, critics say. "The middle market is sick of paying high commissions," says Mr. Kehrer. Moreover, life insurance is currently at odds with the nation's demographics. As Americans live longer, financial concerns have shifted from being protected in the event of untimely death to building a financial nest egg for a long life. From this perspective, many consider mutual funds and annuities - simpler products with far lower commissions - more compelling. There's also the old adage that life insurance - given its reminder of human mortality - is sold, not bought. And skeptics question whether banks have the market know-how to sell a full range of life insurance products, many of which have investment benefits that are harder to explain than an annuity or a mutual fund. The only kind of insurance banks will be able to sell profitably is term insurance, says Robert W. MacDonald, chief executive of Life USA, a Minneapolis underwriter who specializes in selling annuities. "It's a commodity product," he says, and banks "are by nature commodity order- takers." But banks, by their actions, are already countering some of that skepticism. Louis Daniels, a senior vice president at United Jersey Bank, has established a reputation for effectively selling sophisticated life products, including variable universal, in which a customer has a choice of investment options to built up the cash value of the policy, as well as a variety of premium payment options. A product like variable universal life generates premiums that on average are more than double that of a term policy, according to Limra International. Mr. Daniels says his dedicated agents sell four policies a week. Traditional life agents - lacking the multiple lead sources of a bank agent - average about one policy a week. As United Jersey's reputation as a life insurance provider has grown, Mr. Daniels finds himself more popular with underwriters. "When we started in 1989, life insurance underwriters didn't want to talk to us," he says. "They feared they would upset their captive agents and ... have a revolution on their hands. "Now, I get two or three calls a day from insurance companies," he says. The advantages that banks bring to insurance marketing can't be denied. For one, banks - with their extensive branch and ATM networks - come into more contact with potential customers in a week than most insurance agencies could hope to reach in a year. Banks also have the capital and the access to state-of-art communications technology to further leverage that customer base. Today, for example, a Chemical Bank customer can apply for a term policy on an ATM machine. The next challenge for the banking industry is to work with underwriters to come up with lower-cost policies for consumers. Traditionally, life insurance has been expensive because it was sold by a relatively unproductive work force - life agents. If a bank rep can sell three or four times as many policies a week as a life agent working the coffee-table circuit, then it follows that banks have the potential of bringing down the price of a policy. "If banks are going spew the rhetoric that they can deliver the product less expensively, it's incumbent upon them to do that," says Mr. White. "Maybe you can trim a commission from 80% to 60%. You can pay your sales force a lesser commission per sale, because they are making more sales. You can take that difference and put it into the product." The challenge ahead for banks is big, but Mr. White has some words for the pessimists. "If all you do is look at what is, you can never get to what can be."

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