Two insurance companies, Hartford Financial Services Group and USF&G Corp., are working with banks to sell insurance to their small-business customers.

"The banks have the relationships with small-business customers," said Geoff Smith, vice president of commercial affinity at Hartford.

Banks that recently began offering Hartford's commercial insurance include Fleet Financial Group, First Union Corp., and National City Corp. KeyCorp plans to offer USF&G's insurance.

Executives at both insurance companies said they want to work with other banks. A spokesman for Travelers Property Casualty Corp., a unit of Travelers Group, said it is also interested in selling insurance through banks, but has not formed any partnerships yet.

This month National City mailed offers for Hartford's property and casualty insurance to 100,000 small-business owners and expects a 2% to 3% response rate, said Nata Munk, vice president and product manager for the bank's insurance services group.

Banks working with Hartford receive a percentage of each insurance premium as commission for the sales. But Kenneth Coleman, president of National City Life Insurance Co., said the insurance sales also help build relationships with small-business customers.

"This is one more element of service we can provide to our customers," Mr. Coleman said. "It makes us more of a counselor and trusted adviser to them."

And small-business owners say they need help with insurance. A National Federation of Independent Business survey of 3,471 of its members found the entrepreneurs' greatest problem was the cost of health insurance.

The cost of workers' compensation insurance ranked third and availability of liability insurance ranked 12th in the group's survey. In comparison, problems finding long-term financing ranked 63d on the list of 75 problems.

Mr. Coleman said banks help reduce the cost of small-business insurance because it is cheaper to sell the products through banks than independent insurance agencies.

KeyCorp last month began offering health insurance for small-business through Kaiser Permanente and United Health Care and plans to offer property and casualty insurance through Baltimore-based USF&G next year.

"We want to focus on deepening and broadening our relationships with customers to increase our profitability," said Michael Hellyar, senior vice president for KeyCorp's insurance management group.

Mr. Hellyar said KeyCorp hopes to sell the health-care insurance to 6% of its about 400,000 small-business customers in three years. KeyCorp plans to sell the insurance over the Internet and through the bank's branches, he said.

Andrew Stern, USF&G executive vice president for strategic planning and reinsurance operations, said the company wants to develop its relationship with KeyCorp and eventually work with other banks. He said the partnership could generate $50 million in premiums in a few years.

"Some small-business customers want to buy insurance through a bank, and we have to be where the customers want to be," Mr. Stern said.

USF&G and Hartford sell small-business insurance through telephone call centers, which lets them give customers a rate quote within 15 minutes.

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