As banks delve into the world of nontraditional products, annuities are emerging as preferred products, according to a recent study by the Financial Institutions Insurance Association.

More than 77% of financial institutions that market insurance offer annuities, the study found.

Credit life insurance was the second-most popular offering (70%), followed by mortgage life insurance (69%).

Other products mentioned by more than half of the institutions surveyed include life, accident and health, automobile, and homeowners insurance.

Designed as a Benchmark

The association's study is designed to provide members with a benchmark for making comparisons with other banks marketing insurance.

The trade group, based in Corte Madera, Calif., based its findings on 135 responses to a survey mailed this spring to financial institutions involved in bank insurance marketing.

About 65% of the responses came from commercial banks, 28% from savings banks, 4% from savings and loans, and the remaining 3% from credit unions and others.

The percentage of respondents with assets of more than $5 billion was 44%. Only 18% of those surveyed has assets of less than $1 billion.

The survey found that by a wide margin, licensed bank agents and third-party agents are the most common distributors of insurance products marketed through banks.

While 96% of the institutions surveyed use this channel, only 53% use direct mail marketing and just over a quarter market through bank cards.

In a breakdown of agent distributors, annuities again fared best. More than three-quarters of respondents offer annuities through bank agents or third-party marketers.

A mere 6% of respondents use direct mail to promote annuities and less than 2% offer annuities to their bank card holders.

Furthermore, nearly 69% of the institutions polled own a licensed insurance agency.

Retirement Vehicle of Choice

The annuity marketing group includes money-center banks like Chase Manhattan Corp. and Citicorp, as well as relatively small regional players.

Annuities have become the retirement vehicle of choice for many Americans, according to officials at Keyport Life Insurance Co., Boston.

They have become increasingly popular because they provide income growth while allowing investors to defer taxes.

Variable annuities, which invest in underlying mutual funds - providing policyholders with the ability to hedge against inflation even more - have led the way in the surge in annuity sales through banks.

Many annuity marketers are pushing these products as "mutual funds with a tax break."

Their tax-free qualities have sent sales soaring to an all-time high. In the first six months of 1993, variable annuity sales were higher than in any previous full year.

About $3.5 billion in variable annuities were sold through banks in 1992.

"Bank personnel have an increasing comfort level with alternative investments." said Keyport president John W. Rosensteel.

And that comfort level is trickling down to their customers, he added.

Mr. Rosensteel predicted that "the success the banks have had in the '80s selling mutual funds is a precursor of the success they will have selling variable annuities in the 1990s"Top InsuranceOfferings of BanksBased on survey of 135institutions that offerinsurance. Percentagesinclude multiple responses.Annuities 77%Credit life 70%Mortgage life 69%Life 67%Accident & health 66%Source: Financial InstitutionsInsurance Association

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