It is tempting for banks that have just bought an insurance agency to deal with the culture clashes between them by maintaining their separateness, but a year or so after the merger it is to the advantage of bank and agency managers to begin integrating their organizations in earnest.
My experience is that if separation between the two groups persists too long, they begin regarding "those guys over there" as not really part of the bank. This is particularly true for an agency with a well-established brand that the bank may not want to dilute by adding its own name above the door, or even on the letterhead.
Many times, to justify the multiple paid for a foundation agency or even for subsequent purchases, cross-selling ratios are projected that would add 4 or 5 percentage points to the return on investment based on cross-sales potential over three to four years. Naturally, if the projected cross-sales and expected savings are not achieved, neither will the hoped-for ROI.
So how should the integration between the bank and agency take shape, and what issues impede a smooth integration? The major hurdles can be found in four categories that mirror a company's major functions - marketing, sales, operations and administration, and customer service.
Immediately after an agency deal closes, there is usually a great deal of internal and external publicity. At some banks this is the last time they will put anything about the agency on bank stationery. But one of the easiest ways to get the public to identify the agency with the bank is through joint advertisements and community events.
Obviously, all supporting operations should be enlisted in this effort. For example, licensed telephone sales agents should be available to answer questions or provide quotes through the bank's telephone center. It is obvious, but bears repeating, that the bank's Web site must link directly to the agency, with dedicated staff members responsible for monitoring and responding quickly to requests.
Most banks put a senior member of the acquired agency on a number of bank committees. However, I do not advocate taking up the time of a "major producer" at the agency to sit in on nonproductive meetings. Instead the bank-insurance executive should act as a wholesaler and coordinator for the unit.
If the bank has made more than one agency purchase - particularly if the agencies are in multiple states - then the marketing efforts are three-way, and the communication must be not only to bank employees but also among the agencies. The agencies should also consolidate their product mixes and carrier contracts.
One of the biggest impediments to sustainable quality cross-selling is the fear that a good client will not be treated well by the insurance agent. The reverse can also be true if the agency is cross-selling bank products. The only way to combat this is with the so-called halo effect - when, after constant exposure, some characteristics that were considered negative, like an agent's aggressive sales style, become seen as virtues.
This effect can emerge only after joint sales calls are made and a few successes are enjoyed. This makes the expertise the agency possesses evident to lenders and retail executives.
An opportunity that should be explored immediately during the integration is the use of direct marketing programs targeting specific customer groups and coupled with an Internet administration and quoting procedure to push up cross-sales ratios. This will help combat the perceived negative of a reduced insurance sales force in the branches, which may occur after an agency deal.
Integration must include compensation both for referrals and licensed representatives. One successful program puts people in teams and rewards them for cooperation. Bank officers are matched with insurance specialists and individuals cannot receive bonuses unless the team meets its goals.
Operations and administration (including compliance) is an area usually scrutinized to determine how effectively existing businesses are being managed but rarely to find whether the operations are well suited to the idiosyncrasies of selling within a bank.
If the commission and fee total per agency employee averages $112,884, then a well-managed agency in a bank insurance program should achieve at least 20% better than that through cross-selling and volume efficiencies, particularly if direct sales methods are used. In my experience, this has not been realized.
Often as soon as an integration begins, the agency finds it is hiring more employees to respond to a higher volume of quote requests but fails to build sales as fast as expected, because of poor targeting. This should not halt integration efforts if both parties are realistic about the effort required to achieve full integration.
Customer service, particularly claims-handing, can enhance or erode the bank's relationships not only with clients but also with the agency. A competent client service staff can be trained to cross-sell bank products as well as to sell more insurance when policies come up for renewal. But success here requires point-of-sale support, which must include motivation, process competencies, and an understanding of the bank's and the agency's unique selling points.
It is also important for both to draw insight continually from line employees and particularly from customer complaints.
Seamless agency and bank integration takes patience, creativity, and capital, but the rewards are achievement of the ROI planned when the deal was struck.
