As other banking companies weigh insurance options introduced by the financial modernization law, HSBC Holdings PLC is already poised to build up its U.S. insurance business.
London-based HSBC, which operates 450 branches in New York state as HSBC Bank USA, has been marketing insurance in various ways for 30 years. It is involved in at least some aspect of insurance in more than 20 countries, including the United Kingdom and Brazil, as well as Hong Kong and other Pacific Rim markets.
Now, in hopes of ramping up its U.S. insurance business, HSBC has a multipronged strategy in place that includes among other things insurance licenses for 1,600 employees, a customized insurance product for customers 55-75 years old, and an auto insurance call center. It is also testing underwriting through a reinsurance subsidiary.
"It's a strategic pillar to grow the insurance business here, and our experience across the globe is helping us tremendously," said David Fried, president of HSBC Insurance Agency USA in Buffalo.
Insurance accounts for about 9% of HSBC profits globally, but in the United States the share is 2%. The company's goal is to raise the U.S. number to about 10% while building the global number to 20%. HSBC Bank USA has $90 billion of HSBC Holdings' $569 billion of assets.
To build its U.S. numbers, the company has trained representatives at every bank branch to sell life insurance. "Most banks are selling through investment advisers," Mr. Fried said. "But we would like the employees in the branch to be able to understand the customers needs. That's why our bank has made the commitment to train everyone and make insurance a mindset, not just a product."
So far, HSBC has succeeded, according to Carmen Effron, president of C.F. Effron Co., a consultant in Westport, Conn.
"HSBC's senior management made the commitment to sell insurance, while other banks are still in the feeling out process," Ms. Effron said. "Senior management says that selling insurance is as important as offering checking accounts. And remember, they've been successful all over the world at doing this. So they have a head start and they are good."
She said that putting trained representatives in every branch was an enormous undertaking that could not have been completed without the dedication of senior management.
Ms. Effron said that HSBC is ahead of the game because it customizes insurance products for its customers.
For instance, HSBC offers a Senior Secure product underwritten by CGU Life Insurance Co. of New York. The policy targets customers 55 to 75 and was designed for New York-based HSBC. It is branded by HSBC and sold through its New York branches, said Gary Warden, vice president of financial institutions for New York-based CGU Life.
Customers can buy up to $25,000 of insurance regardless of their medical condition, and there are no medical exams, said Mr. Warden.
And HSBC is preparing to take an underwriting position on the Senior Secure product through its Arizona-based Marmid Life reinsurance subsidiary, Mr. Fried said. By taking on some of CGU's risk on the product, HSBC could "test the waters" for taking on risk in the United States. From there, it is possible that the bank could underwrite its own policies.
"Being a reinsurer is an effective way to get in the risk-taking business without the required infrastructure that comes with being an insurance company," Mr. Fried said.
The financial institution is taking another page from its overseas book by not selling auto insurance through its bank but rather through a call center. According to Mr. Fried, direct sales on auto insurance are up in Europe and the United States.
"Geico's been very successful at selling through a call center. It's a price sensitive product first and foremost," Mr. Fried said, adding that another personal property line, homeowners insurance, is marketed directly to mortgage applicants at the time of approval.
"We're getting an 11% hit rate on approved applicants buying insurance through us," Mr. Fried said. "To be honest, that's not good. We have a 40% hit rate in the U.K. and Brazil and we have to get that number up in the U.S. as well.
"We've approved the loan, we've done the credit work, we can offer to take another worry away from the customer, it's convenient, it's a natural fit. Now we have to get it to happen."