For many years, life insurance was a puzzle that banks could not seem to solve.
There appeared to be ample public demand, and banks' retail customer bases were seen as a natural market. But widespread attempts to sell life insurance in the 1990s fell well short of expectations: Bankers found the sales process long, involved, and often intrusive. And the sales that resulted yielded relatively small profits.
In recent years, however, some banks may have found the key: speed. Life insurance has begun to take hold, an analyst says, thanks to new types of products that require fewer questions for the buyer and can be approved in minutes instead of days, weeks, or even months.
Two types of "simple-issue" insurance - one that insures against death and is renewable, and one that packages insurance with a significant investment component - have established a beachhead in the bank channel. Of the two, the latter, known as "single-premium" life, has proven the bigger moneymaker.
Bank sales of single-premium life have posted a compound annual growth rate of 56% since 2000 and accounted for $1.15 billion of premiums in 2004, according to Kenneth Kehrer Associates, a consulting firm in Princeton, N.J., that tracks bank sales of insurance and investment products.
The top underwriters of single-premium life insurance sold through banks are Allstate, Aegon/Transamerica, Liberty Life of Boston, and Travelers Life (the Citigroup unit that is being sold to MetLife Inc.), said Kenneth Kehrer, the consulting firm's president.
One sales leader is the U.S. Bank unit of U.S. Bancorp in Minneapolis, which had premiums of more than $100 million last year and expects to exceed that this year.
"Hot and now, like fast food, that's what they want," U.S. Bank's John Falk said laughingly. "Simple-issue tends to fit that format."
The bank has offered simplified life products since 1998, but it took many months of training for the brokers in the branches - 450 at present - to get comfortable with them, said Mr. Falk, who is a vice president and managing director of insurance.
Single-premium life is a big seller among senior citizens, he added. A version that U.S. Bank sells can be used to prepay nursing home costs. Another lets customers transfer the investment portion tax-free to heirs, he said.
Indeed, the brokers and platform bankers who sell single-premium life at banks around the country are trained to make the point to customers who consider buying annuities that the latter lack the tax-free inheritance feature, said Mr. Kehrer.
Single-premium life is a logical fit in the simple-issue format because most of what customers pay for the product goes into the investment portion. The policies include a cash value, which grows over time and can be withdrawn. The death benefit is based on the relationship between the amount invested and the cost of the underlying insurance.
So have banks unlocked a rich new revenue source? Opinions vary, said Mr. Kehrer. Sales of simple-issue term life are "off to a good start," he said.
But some institutions, though happy to be able to offer term life insurance to their customers, say the revenue still is low compared with the time and effort spent on making sales. Others are content, Mr. Kehrer said, particularly those with strong volume.
"To move the needle in bank revenue, you have to sell a lot of this," he said.
Mr. Falk said he is pleased at U.S. Bank's results so far. Sales of simple-issue, single-premium life already account for half the retail insurance business in U.S. Bank branches.
Reps with series 7 securities licenses are the main sales force, he said, and selling these policies prepares them for selling more complicated kinds of life insurance.
Because term life policies are mainly bought to provide benefits should the owner come to harm, a much closer look at risk is required. That makes them a more complicated product to sell and requires those who sell them to ask more personal questions.
"The length or extent of life insurance applications, the underwriting process, and the time needed to underwrite have always been associated with the amount at risk if the insured dies," said Michael White, the president of Michael White Associates, a bank-insurance consulting firm in Radnor, Pa.
The simple-issue life trend has little to do with a parallel trend - that of banks buying independent insurance brokerages and agencies. These acquired businesses have tended to specialize in commercial insurance.
