Barnett Banks, a pioneer in the insurance business, has started selling automobile insurance throughout Florida, and has more offerings on the horizon.
The Jacksonville-based bank began offering auto insurance to Florida customers last month, said Richard H. Jones, chief asset management executive at Barnett. The bank will begin selling homeowners insurance later this summer, he said. American Express Property Casualty underwrites the auto insurance, and will be the homeowners product carrier, too, Mr. Jones said.
Selling the product via direct mail is the first of the program's two phases, Mr. Jones said in a telephone interview.
Part two will kick off this summer, when the bank will begin pitching insurance products when customers buy other bank products, like auto loans. Interested customers are directed to call Barnett Insurance Services' toll- free telephone number.
Banks began selling insurance in earnest last year after a Supreme Court ruling on a case brought by Barnett affirmed banks' authority to sell insurance through towns with fewer than 5,000 residents. But only a handful of large banks currently offer auto insurance, said Kenneth Kehrer, a Princeton, N.J.-based insurance consultant to banks.
"It is typically hard for banks to start an auto insurance program because they can't get carriers interested in selling through them," Mr. Kehrer said. Insurance underwriters have been moving away from the less- profitable product, and are reluctant to sign up new carriers, he said. KeyCorp and Norwest are among the few banks that sell auto insurance.
KeyCorp sells auto insurance through a toll-free telephone number in Washington, Oregon, and Idaho, a company spokeswoman said. And Norwest offers the product to checking account customers. There are also a number of community banks that steer customers to local insurance agencies, Mr. Kehrer said.
Adding to the challenge is pressure that existing agents put on the carriers to keep out newcomers, like banks. And new agents often have a riskier book of business at the beginning of their business, Mr. Kehrer said, so insurance companies do not jump at the chance to sell through a new channel.
But the American Express unit is moving into the bank market its competitors are leaving vacant.
The Green Bay, Wis.-based insurance underwriter is taking advantage of the court ruling and plans to have agreements with six to nine banks by the end of 1997, said Kenneth J. Ciak, president of the property casualty unit. About 25% to 30% of its business by the end of 1998 will be through banks, Mr. Ciak said.
"We think the bank marketplace is a very attractive one," Mr. Ciak said. American Express will forge similar agreements with the so-called "super regional" banks with marketing expertise and a large customer base, said Mr. Ciak.
Future ventures will be structured like the Barnett deal, he said. The bank will handle the marketing, and American Express will underwrite and support the banks' efforts with its direct response expertise and staff.
Some banks say they are wary of the business, Mr. Kehrer said, citing the concern that a bad claim experience might drive a customer to another bank. But that worry is unfounded, Mr. Kehrer said, because customers understand the difference between a claims adjustor and an agent.
American Express sells its insurance products-auto, homeowners, and personal liability-primarily to American Express cardholders, American Express Financial Advisors clients, and through employers using the company's payroll deduction service Barnett is similar to those venues, Mr. Ciak said, because it sells products as part of a larger financial relationship, as American Express does.
"If a customer buys a house, they (Barnett) want to be sure the homes are insured," Mr. Ciak said. "If someone buys a car, they want to sell car insurance. For Barnett, it's not just selling another product, it's filling out a financial relationship.'
