After years of shunning banks, some of the nation's largest insurance companies are gearing up to peddle their wares in the bank marketplace.
The Equitable Cos. is developing a unit to sell its insurance through banks and plans to start signing up bank clients next year. Prudential Life Insurance Company of America has brought in consultants to study the bank channel and is expected to launch a significant bank program soon. And Massachusetts Mutual Life Insurance Co. is also said to be looking at sales through banks.
Unlike some rival insurance companies, these household names have long avoided courting banks for fear of angering their own sales forces. But with life insurance sales stagnating, they are eagerly eyeing banks, brokerage firms, and financial planners.
"Their core business of selling life insurance through agents is floundering, and they are looking to banks as their saviors," said Kenneth Kehrer, a consultant in Princeton, N.J.
A recent Supreme Court decision is giving insurers another reason to look at the bank channel. Last month, the high court ruled that states cannot block insurance sales by banks in small towns.
The ruling is widely expected to stimulate new interest in insurance sales among banks. Indeed, banking trade groups have begun crafting guidelines for such sales. (See related story, page 2).
The legal breakthrough, coupled with sluggish sales by traditional life insurance agents, are an opportunity banks hope to exploit. Some bankers say they are in a position to demand both fat sales commissions and substantial marketing support from the insurers whose products they sell.
"Banks will expect more because they have the customer base to support it," said Joseph Alberti, president of Milwaukee-based bank Firstar Corp.'s insurance subsidiary.
Selling insurance through banks is nothing new. But to date, most insurers in the bank market have been smaller players who relied heavily on other companies' sales forces to pitch their wares.
These latest entrants, by contrast, have large fleets of "career agents" - salespeople who are under contract to promote a specific insurer's products.
The risk of sparking the ire of these career agents - the backbone of their sales efforts - has kept some of the largest insurers from aggressively marketing through banks. Indeed, Prudential, along with Metropolitan Life Insurance Co., dropped seminal bank programs in the early 1980s because their agents cried foul.
"It's been very hard for these insurance companies to get themselves in a position to work with banks, because the agents see banks as formidable competitors," Mr. Kehrer said.
But with sales stalling, insurance companies are more willing to risk angering their agents. According to the Life Insurance Marketing Research Association, 12 million new life policies were sold last year - a 29% decline since 1982. Sales have remained flat at about $9.5 billion to $10 billion since 1985.
Two other insurers with legions of career agents - New York Life Insurance Co. and Aetna Casualty and Surety - began efforts to sell through banks last year. They hope to duplicate the success that a few others, including Allstate Insurance Co. and Lincoln National Corp., have long enjoyed.
Officials at Equitable and other insurers looking at the bank channel say they are ready to defend their plans to their career agents. While traditional agents typically sell insurance to wealthy consumers with complicated estate planning needs, these insurers said, banks tend to target people looking for cheap term insurance and annuity products.
"Insurance agents have their clients, and banks have theirs." said Jerome Golden, president of Income Management Group, a unit of Equitable charged with developing new products for financial intermediaries.
Equitable - which has already inked a sales agreement with Chase Manhattan Corp. - is setting up a new division to sell its wares through banks, brokerage firms, and financial planners, Mr. Golden said.
He predicts that in five years, banks will account for 15% to 20% of Equitable's life insurance and annuity sales. Another 30% will come from the insurer's 7,200 career agents, while financial planners and brokerage firms will generate the rest, he said.
Prudential, meanwhile, is looking at community banks - a plan that one competitor described as a concession to its 13,000 career agents. "Prudential is less likely to alienate the sales force because the potential for premiums at community banks is much less than at money- centers," said Bradley Powell, a senior vice president in the financial institutions division at Jackson National Life Insurance Co.
The company, whose chairman is Chase Manhattan's former chief, Arthur F. Ryan, hopes to take advantage of the recent Supreme Court ruling, but has yet to make any final decisions, a spokesman said.
Executives at Mass Mutual, meanwhile, say they are looking at selling insurance through a subsidiary, OppenheimerFunds Inc., a leading seller of mutual funds through banks.
"They're looking at the bank distribution channel, but they're not quite sure how to approach it," said Maryann Bruce, a senior vice president at Oppenheimer. A spokeswoman for Mass Mutual, which is currently merging with Connecticut Mutual, said the company has yet to formalize any plans for the bank channel.
For insurers, selling through banks could be an expensive proposition, as banks are demanding more and more support from their product providers.
Firstar, for example, has Transamerica Life Insurance and Annuity Co. fronting more than $70,000 on a 100,000-piece mailing to market a new term insurance product, Mr. Alberti said. Firstar will not reimburse Transamerica if the bank doesn't make a profit on the term product this year.