Commercial banks boosted their sales of traditional insurance products by 35% last year, to $8.6 billion, according to a study to be released today.
The study, commissioned by the Association of Banks in Insurance, also concluded that 300 banks had entered insurance sales in 1998.
The trade group's survey, which drew responses from 407 banks, offers a rare glimpse at how banks are faring in the relatively new business of selling life and property and casualty policies through branches. Banks, which traditionally limited their insurance activities to selling credit life policies and annuities, have piled into the business since federal laws governing their insurance powers were loosened in 1996.
The survey sample included about 30 banks with assets of at least $10 billion, or nearly half the banks in that group.
Bankers at the trade group's annual convention here said the findings are encouraging but added that the industry has a way yet to go.
"I think we're getting ready to take a quantum leap," said Glen Milesko, president of the association and chairman and chief executive officer of Bank One Corp.'s insurance unit. However, he expressed disappointment that the numbers were not even higher.
David L. Holton, president of Wachovia Corp.'s insurance services subsidiary, predicted that banks will continue to make big strides in the insurance business. "I think we'll be growing like this for another five years," he said. "More and more banks are learning what insurance can do for them."
The convention itself, which drew 500 participants, points up banks' growing interest in the business. Bankers see insurance sales as a way of rounding out their product lines while reeling in fee income.
The study found that credit life insurance and annuities remain hot sellers through banks, accounting for 72% of volume in 1998. But this share is down from 78% a year earlier. Including these products, bank sales of insurance totaled $31.1 billion in 1998, a 12% rise.
Banks, meanwhile, have set their sights on rapid growth in product lines that they have only recently begun to explore.
The survey found that 22% of banks plan to add property and casualty policies in the next two years, placing them ahead of any other insurance products.
That was surprising because "if you go back a few years the idea was banks would stay away from the personal property and casualty lines business," said James B. Campbell, principal and senior vice president at Atlanta-based Reagan Associates, which compiled the study. Property and casualty policies were seen as a poor fit because claims need to be serviced regularly, adding a heavy back-office component to the sales effort.
Long-term-care insurance is also a hot product with bankers, he said. About 17% of the surveyed banks offer it, and 20% said they plan to begin marketing it within two years.