The new head of American Express Co.'s life and annuities business says he is looking to expand its product line and distribution through a variety of channels, including banks, after a recent slip in its bank-annuity sales.
"American Express has relationships with a number of banks, most important amongst them Fleet, Wachovia, Wells, and SunTrust," said Mark Schwarzmann, whose hiring to fill the new post of senior vice president of insurance and annuities at American Express Financial Advisors Inc. was announced last Thursday. He said he is analyzing ways to improve these relationships, perhaps by broadening the product lines offered through banks.
"One thing that we're doing as we speak is enhancing the products," Mr. Schwarzmann said.
In the third quarter American Express' annuity sales through banks slipped by comparison with other providers', as it fell from No. 5 in the channel to about No. 10, according to Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks such sales.
Another key initiative for the unit is "to find ways to broaden distribution of our life and health products," Mr. Schwarzmann said. "Today they are sold exclusively through American Express financial advisers, but they should be a good fit in other distribution channels," such as banks.
American Express has focused on selling through a few large, key banks that have big market share, instead of trying to get its products broadly into smaller banks, said Kenneth Kehrer, the consulting firm's president. Four banking companies - Wachovia Corp., Washington Mutual Inc., Bank One Corp., and Bank of America Corp. - together have 25% of the bank-sold annuity market. And 10 bank companies - including Wells Fargo & Co. - have 41%.
In addition, he said, American Express has a distinct advantage with these companies because it is able to offer reciprocal distribution. Basically, the company can offer to sell a bank's annuities through the American Express Financial Advisors network if the bank puts American Enterprise products on its shelf.
The market for life insurance sales through banks remains small, Mr. Kehrer said, but this can present an opportunity for a company like American Express that is looking to break in. "There aren't companies that have established a dominant position in the market yet," he said, unlike the situation with annuities, where a few big players already dominate shelf space in many major banks.
Selling life insurance in banks remains a puzzle for many insurers, said Mr. Schwarzmann, who once worked at GE Financial Assurance, where he was in charge of market strategy for variable life products among others. To succeed, "it has to be a very targeted approach. In my time at GE we focused a lot of energy on the underwritten products and found that you have to pick your shots very, very well."
American Express is focused on more complex life insurance products, like variable life, and that "is probably a product that is more well-suited for the trust department or private bank areas than necessarily the platforms," Mr. Schwarzmann said.
"The issue really is more education than anything else," he said. "If you think about the dedicated brokers in banks today, selling a life insurance policy is by and large a big step."
Many bankers are unfamiliar with the details of life insurance policies and therefore not comfortable selling them, he said. American Express is "thinking differently about how we measure our own success," he said, and focusing not on advisers or brokers who sell a few policies a year but on those that sell at least one policy a month "as the true measure of somebody who understands the product."
Because life insurance products change so quickly, even someone who makes a sale may not maintain that success if he or she does not sell life insurance regularly, Mr. Schwarzmann noted. So helping these people remain current and knowledgeable about the products, and keeping them selling, are key requirements.
Another big issue for life insurance in banks is the length and complexity of the underwriting process, Mr. Schwarzmann said.
Enduring what can be a multiweek process of selling, underwriting, and issuing a life insurance policy can be difficult "in a very transactional-oriented place like the bank," he said. Though some insurers have simplified underwriting to avert this obstacle, Mr. Schwarzmann said this approach has problems.
"Simplified underwriting typically means higher costs," he said. "You are going to skip a step, and somebody has to pay."
Customers who would buy a more complicated product like variable universal life sold through a private bank are probably less sensitive to the time issue, and this helps American Express. "I would argue that they would be willing to spend more time to get a better price," Mr. Schwarzmann said, compared with someone buying a smaller, simpler term policy.
American Express sells its annuities through banks under the brand name American Enterprise. In the third quarter, the most recent for which data are available, it was ranked No. 10 in bank sales of fixed annuities - at $201 million, down 49% from the second quarter and 45% from the third quarter of 2002 when it sold $366 million.
In variable annuities American Enterprise was also ranked 10th, at $155 million of sales, down 69% from the second quarter and 73% from the year earlier, when it sold $570 million worth.
These figures from the Kehrer firm show some of the fluctuations this brand has had in the bank channel, according to Mr. Kehrer. American Enterprise has been in the top five of bank-annuity sellers in some quarters but fallen much lower in others.
Mr. Schwarzmann joined Minneapolis-based American Express Financial Advisors from Allfinanz Inc., a Dublin software company that makes processing and automation software for the insurance industry, where he was the chief executive officer.
Before joining Allfinanz in 2000, he filled a variety of roles at GE Financial Assurance in Richmond, Va., including head of its bank channel.
