Bankers and insurance executives agree on some attributes of a successful life insurance sales program but disagree about how effectively insurers deliver these services.
These findings, from a study designed by the author for the American Council of Life Insurers, illustrate the need for dialogue on closing the culture gap.
Two survey topics illustrate the difference in perspective. Bankers ranked having effective insurer sales support, such as wholesaling and customer service, as very important. They gave the attribute a score of 8.3 out of a possible 10. The insurers agreed, giving the attribute a score of 8.5. However, banks' satisfaction was only 5.8, compared with the insurers' rating of 7.3.
Though the 2.5-point gap between the banks' importance and satisfaction scores is "very significant" in the study's terms, insurers' higher sense of satisfaction highlights that this is a prime area to focus resources or have in-depth discussions in order to bridge the difference in perception.
A second topic related to optimizing the relationship involved product integration within the banks' procedures and systems at the point of sale. Bankers ranked this 7.5 ("more important"), but their satisfaction score was 4.6 - a gap of 2.9 points. The insurers give this attribute's importance a score of 6.8; however, they are much more satisfied with their delivery of this service, at 6.0, than the bankers are.
The study also looks at the differences in specific scores between the two groups. For example, in the area of having products integrated into the bank's procedures at the point of sale, there was a 1.4-point gap in the satisfaction scores of the banks (4.6) and the insurers (6.0).
The gaps in just these few attributes make it obvious that a true partnership philosophy is not being developed.
Is it surprising that banks are "extremely" dissatisfied with all 10 types of training they get from insurers, or that they do not rely on insurers for legal and compliance support, or that they are not overly concerned with the insurers' profitability but expect their own profitability to be of the "highest concern"?
These issues and many others were raised in the ACLI Study on Bank Insurance, completed this summer by CF Effron Co. LLC in partnership with Baker Daniel and KPMG.
For years both banks and insurers have struggled to find the magic bullet that would help banks sell life insurance. Anecdotes abound about why this has been so difficult, what works, and what doesn't. However, data were not available to measure the differences in perceptions and attitudes before this study. A widely held belief is that the cultural differences between banks and insurers contribute to the relative dearth of bank life insurance sales.
The study, which will be released Oct. 13, is a first look at the cultural and perceptual differences between banks and insurers using the statistical method of "gap analysis." It identifies many areas that need improvement, as well as what methods work.
Senior executives of banks and insurance companies from across the country completed questionnaires designed to examine topics such as distribution, marketing and sales, product design, risk and profitability, administration and operations, and the overall effectiveness of the life insurance program.
The questionnaires for bankers and insurers were essentially identical, allowing for ready comparisons to be made between the bank and insurance company responses. The study asked 25 core questions that had multiple attributes. In all, more than 140 attributes were rated within six major categories.
Participants were asked to score each attribute on a scale of 1 to 10. Comparisons of the bank and insurance company responses demonstrated "gaps." Differences of more than 2 points were considered extremely significant. Over all, 41% of the attributes got score gaps that could be considered significant (1 point or more).
Banks and insurers realize that they are missing a golden opportunity to market life insurance (excluding annuities) to so-called emerging-affluent customers, defined in the study as those with a net worth of $100,000 to $500,000. Banks are looking to the insurers for a true partnership, but insurers are treating the banks more like a distribution channel or a large general agent.
Though this approach might work in selling property/casualty lines in an established agency owned by a bank, it does not work for selling life insurance to emerging-affluent customers.
The study went beyond just comparing differences. It also asked the participants to rate the level of importance and their relative satisfaction on each of 17 attributes that characterize the services necessary to "optimize the relationship." This revealed "numerical gaps" in attitudes.
This approach highlighted areas where resources might be focused to achieve improvements. Though bankers and insurers might agree that a specific attribute is important to optimize their relationship, as they did in the two examples at the beginning of this article, the banks rated service delivery in these areas lower than insurers did.
The study also found that 61% of the banks worked with 6 to 20 life insurance carriers and 22% worked with 50 or more.
A single carrier trying to work with one bank is unlikely to have the economic incentive to support the bank in designing a particular, perhaps proprietary, technology, process, or product that characterizes a true partnership. Only if there are agreed production goals - a commitment that many banks are reluctant to make - might the insurer's attitude change.
However, an overall reduction in the number of carriers would speed communication, improve the alignment of efforts, and reduce confusion at the point of sale.
Another integration issue - and perception gap - revolves around banks' confidence in their ability to integrate insurance agents into their branches and make them profitable, even though insurers question the profitability of having branch-based agents.
Thirty-three percent of the banks felt that branch-based agents were the most profitable way to distribute insurance, but 31% of the carriers said this method is barely profitable.
This is a good example of the cultural difficulties facing the two kinds of companies. Both want to distribute life insurance profitably, but the financial dynamics of achieving this goal differ between them.
The attributes mentioned so far give an indication of the cultural divide's extent. To bridge this gap, the two types of companies, with no hidden agendas, must candidly discuss production expectations, training, wholesale support, commission levels, profit margins, case management support, operations, and technology support processes.
The study showed that banks and insurers generally agree on what defines a successful life insurance program - mutually aligned commitment, integrated process, differentiated strategies for bank distribution channels, effective case management, timely underwriting, informed employees at all levels of the referral and sales process, and bank customers informed about the product and service benefits. However, banks and insurers are just in the first stage of a multistage process.
To achieve successful life insurance sales, a new common culture must be devised. This study is a small step toward identifying the areas that require attention so that a more profitable bank-insurer relationship can emerge.
The study can be ordered from the American Council of Life Insurers at 800-589-2254.
