Chemical Banking Corp. is embarking on a plan to sell traditional insurance products to consumers in their homes.
The New York-based bank recently announced the formation of Chemical Insurance Management Services through a contract with MDS/Bankmark, Morris Plains, N.J.
Bankmark, a unit of Conseco Inc., Carmel, Ind., will help Chemical to distribute insurance on a retail basis through Chemical Insurance Agency Inc.
The deal is "interesting and exciting because it's the first large-scale attempt by a big bank to sell life insurance," said Kenneth Kehrer. president of the Princeton, N.J., consulting firm that bears his name.
Across the Kitchen Table
"The model Chemical is using is more similar to the way life insurance is traditionally sold," Mr. Kehrer said. And that is "across the kitchen table," not in bank branches.
About 150 insurance agents will work on the new venture.
Chemical deliberately chose not to establish an in-branch sales force to sell insurance products, said Dennis Kosovac, president and chief executive of Chemical Insurance Agency.
"We want to meet customers on their own terms -- at their homes or offices," Mr. Kosovac said. "We also plan to distribute through channels other than face to face," he added. These channels include point of purchase and direct response.
"We're trying to build a core part of our business," Mr. Kosovac said. Along with traditional banking services and investment products, insurance is the third part of Chemical's service triangle.
Liberty Financial Deal
The birth of Chemical Insurance Management Services comes just months after the creation of Chemical Investment Services, a joint venture between the bank and Boston-based Liberty Financial Cos.
Unlike the Chemical-Liberty marriage, which is a 50-50 partnership, the Chemical-MDS/ Bankmark deal is purely "a contractor relationship," said Mr. Kosovac.
Nor did Chemical shaft Liberty or its insurance subsidiary Keyport Life Insurance Co., Mr. Kosovac said, despite the fact that the bank considered 25 to 30 companies, ranging from full-line carriers to third-party administrators.
"We're trying to build two businesses -- one in investments and one in insurance," Mr. Kosovac said. "Liberty made the best sense for the investment side and Conseco made the best sense for insurance."
Still, Keyport executives were "surprised" by "the deal," said Keyport president John Rosensteel.
Chemical selected MDS/ Bankmark "because they had the ability and the desire." to work with the bank, Mr. Kosovac said. "We were really looking for someone who understood our strategy, and their strategy coincided with ours," he said.
The insurance and investment products businesses are "two different initiatives from two different parts of the bank." Mr. Kehrer said. Moreover, "the Liberty Financial Bank Group doesn't have that much experience in life insurance."
Clinching the Chemical contract is a major coup for both MDS/Bankmark and its parent, Conseco. With more than $149 billion in assets, Chemical is the third-largest U.S. bank,
Playing in the Big League
The selection of MDS/Bankmark illustrates "the flexibility of our organization to accommodate large financial institutions," said Robert C. Leonard, the company's president and chief executive officer.
"We can design products specifically for a large institution -- not with a cookie cutter," Mr. Leonard said.
MDS/Bankmark will hire, train, and pay Chemical's insurance sales force, though the bank will keep tight control over its client list, Mr. Kosovac said.
So far, it has not been decided if annuities, which are insurance contracts that invest in mutual funds, will be provided by Keyport, the Liberty insurance arm.