FirstMerit Corp. has long bucked the trend for banks to build insurance operations through agency purchases, choosing instead to form insurance sales alliances - and it is continuing to do so with a new partnership to sell a variety of products online.
When the $10.3 billion-asset Akron, Ohio, banking company first entered insurance, "we made a different decision than most of the banks that you read about, and that was to grow our operation somewhat organically, rather than put FirstMerit capital at risk," said Felice Larmer, the president of FirstMerit Investment Services.
Though Ms. Larmer said she would never "rule out" buying an agency, her company's series of alliances with outside providers - including insurers and an agency - have continued to work well.
The banking company said on Monday that it had formed an alliance this time with Answer Financial Inc., an online insurance agency, to offer auto, home, life, health, dental, and long-term-care insurance as well as prepaid legal service, home warranties, vision and prescription discount plans, travel insurance, pet insurance, and other products.
Customers can gain access to the products through FirstMerit's Web site, where links can take them to a bank-branded page on Answer Financial's site. Answer Financial offers products from more than 225 insurers by means of intranets it builds for companies, the Internet, and a phone center staffed with licensed agents.
Ms. Larmer said that FirstMerit decided to work with Answer Financial because it wanted to add products - especially personal property/casualty products like auto and homeowners - and expand its distribution on the Web.
The banking company's insurance operation started out selling term life insurance through tailored mailings to clients and over the phone, Ms. Larmer said. "We used that as a basis to get our name out so that FirstMerit customers knew that we were in the insurance business," she said.
The company has since expanded to sell life insurance and long-term-care coverage through financial consultants in the branches, she said.
And in 1999 FirstMerit started its first joint venture - an arrangement with the Cleveland insurance firm James B. Oswald Co. to sell commercial insurance. Last August it began a venture with Jefferson Pilot Financial whose purpose was to sell discounted group life and disability insurance coverage to commercial clients.
Answer Financial has historically supplied voluntary work-site benefits through intranets created for employers, on which workers could buy products like auto and homeowners insurance that were not in their employee benefit plans. However, Steve Kroll, the senior vice president of marketing at the Encino, Calif., company, said he sees a lot of opportunities for growth through partnerships with financial companies like FirstMerit.
Answer Financial also has partnerships with Juniper Bank, Sallie Mae, and E-Trade Bank. The banks are paid either referral fees or commissions, depending on whether they are licensed to sell insurance. The amount paid is based on several factors, Mr. Kroll said, including how the two companies split up the marketing work.
Many banks already have relationships with one or two carriers to sell insurance online, Mr. Kroll said, and Answer Financial will customize its offerings to include other partners if necessary. In fact, Ms. Larmer said, since FirstMerit was already selling some term life insurance online, this product was removed from the Answer Financial offerings so her company could maintain its relationship with CMI Insurance Services, another online agency.
"What people find in the single-carrier platforms is that most insurance companies have a sweet spot," Mr. Kroll said. "Unfortunately, many times the bank's population extends beyond that sweet spot … . Not every valued customer has a good DMV record or a good health history."
Because Answer Financial has relationships with a variety of carriers, each with different underwriting criteria, it "provides an opportunity to augment their current offerings and go more deeply into their file" of clients.
Mr. Kroll said the call center is a key component of Answer Financial's strategy - in fact, most of the company's revenue comes from it. Most customers use the Web to research products and get quotes, he said, before turning to the phone when they are ready to buy.
He compared phone support to the way banks still rely on teller lines even in the age of ATMs.
"Everybody was going to get rid of all their branches and just have ATMs," he said, but they have found that many customers still need to speak to a human being at some point when they are making an important financial decision.
Ms. Larmer agreed. "Certainly most people shop online, get quotes online, but they still want to talk to somebody. This provides the best of both worlds."
