Banks have a real opportunity to sell more life insurance if they take time to develop a sensible program and get the support they need from insurers, according to Cynthia Saccocia, a senior analyst at TowerGroup, a Needham, Mass., research firm.
"Life insurance is no longer considered a product that is only provided by a life insurance agent. And while those that do have career or captive agents still do very well in individual life product sales, they still risk market share" as banks learn how to better sell the product line, said Ms. Saccocia, the author of a report "Life Insurance Distribution: Turn Up the Volume, Turn Up the Costs."
The report found that since the number of career life insurance agents is falling insurers are turning to alternative channels like banks to boost their sales.
Ms. Saccocia's report said that, despite recent dips in life insurance sales attributable to weak equity markets, the trend line for sales growth appears stable or positive thanks to several factors.
First, she said, changing demographics mean that more investors will be older than 65 and looking for wealth transfer and wealth protection products. Second, insurers are investing in product development that will help them grow in both new and traditional distribution channels. In addition, she said, insurers have been improving their technology and cutting the costs of selling insurance.
But banks have not developed into a key life insurance distribution channel for several reasons.
"I think one of the challenges that the banks face is the ability to have the right structure for the personnel involved in the bank broker-dealer," Ms. Saccocia said. A strong life insurance program needs life specialists on staff or provided by an insurance company to support the bank's platform reps.
In addition, banks need to choose what kind of program they want to develop and focus their resources, Ms. Saccocia said. For most banks that means developing a financial planning program that includes insurance, as opposed to a purely transaction-based model.
The banks must then support that model with hiring, training, products, and technology, she said.
Banks also need time to build life insurance sales. For example, though banks now have a huge share of annuity sales, this took several years to develop, she noted.
The life insurance sale is more complex than other banking transactions, but banks have been able to get around the complexities of selling other difficult products, like variable annuities, Ms. Saccocia said. "They've managed to find ways to get around some of those nuances," she said. "When you take a look at life insurance, it can be a little bit more complex, but it need not be."
Insurers, however, must also make an effort to help banks.
"Not only do the banks need to change the way they perceive life insurance as part of the financial plan," Ms. Saccocia said, but "also the insurance companies need to provide them with the right products."
Banks need more streamlined products that fit into their sales process, she said. Some insurers have made inroads with products that take less time to underwrite, and there should be more of this kind of innovation to succeed in the channel.
Banks also need a lot of help from insurers to develop more in-depth programs, including wholesaling support, training, and perhaps even dedicated life insurance specialists.
Help from insurers "is really going to be integral to the transition from being a transaction-oriented sale to a planning sale or a needs-based sale," she said. And for insurers that already sell large amounts of annuities through banks, the incentive already exists to give life insurance sales in banks heavy support.
For one thing, she said, because insurers offer a variety of products - annuities, life insurance, retirement plans, long-term-care coverage - they have an advantage in banks that want to work with just a few vendors.
An insurance company is one of the few vendors that is going to provide the bank with all the products, she said. Those that already have strong bank relationships can build on them by supporting the banks' life insurance sales with training and specialists.
