Independent Financial Marketing Group, a top third-party marketer of annuities, is setting its sights on the success in bank-channel sales of life insurance that has proven elusive in the industry so far.
It could be a long journey, an executive at the Purchase, N.Y., company said, but the effort is slowly gaining steam.
"It's going to take time, but the opportunity is there because insurance companies have done a dismal job of wholesaling to bank reps," said John P. Sousa 4th, who joined IFMG last winter and is its senior business manager for life insurance.
"There are a couple companies that do it well, but that is it," he said. "Without the proper wholesaling, it's not going to work."
IFMG, a unit of Sun Life of Canada, is hiring regional life wholesalers dedicated to any bank that sells life insurance through the third-party marketer. Already on board is Astoria Federal Savings of Lake Success, N.Y. IFMG is close to hiring a wholesaler to work with Astoria Federal, Mr. Sousa said.
"We're also close to getting an agreement with a large northeastern bank, and we'll hire two wholesalers for them," Mr. Sousa said. "The goal is to have 10 to 12 of these agreements in place by the end of the year. It's for all life insurance products, and we're quite sure that with the right wholesaling, the bank will succeed at selling life insurance."
IFMG's wholesalers will work hand-in-hand with bank representatives who sell generally to the mass market.
"The fundamental problem is, a bank executive says, 'We will sell life insurance' and passes it down the line, and each one of them says … , 'We will sell life insurance,' but not one of them knows anything about life insurance," Mr. Sousa said. "Therefore, we end up with a number of graves."
Banks have made progress in the insurance business, however, and specifically in life insurance. They sold $484 million of single-premium products in 2002, up 48%, according to data from Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks bank sales of annuities and life insurance.
About 75% of the single-premium products sold through banks were universal-life policies, and whole-life made up more than one-fifth of single-premium sales, according to the Kehrer firm. Almost all the single-premium sales were of fixed products.
Bank-sold premium overall, including single-premium and recurring-premium life products, rose 42%, to $643 million last year. Variable life and variable universal life accounted for 64% of first-year recurring-premium sales.
Last year, for the first time, more than half the banks in the United States had insurance fee income, according to Michael White Associates, a Radnor, Pa., bank-insurance consulting firm. Its survey of commercial banks and federally insured savings banks found 4,359, or 52%, reporting some sort of insurance fee income.
Bank insurance fee income grew 17.3% last year, to $3.49 billion. But much of this total probably came from annuity sales, not life insurance, according to the White firm, which did not track specific products' fee revenues.
Banks sold $207 million of weighted life premium last year, up 34%, according to the Kehrer firm. Weighted premium is computed by taking 100% of all recurring premium volume and adding 10% of single-premium sales. Life insurance industry data generally discount single-premium products because historically they have been much less profitable to insurance companies than recurring-premium sales.
Third-party marketers were responsible for about 44% of all life insurance sales through banks in 2002, according to Kehrer Associates. IFMG was the top seller, with $67 million of life insurance sales overall, followed by New York-based Essex Corp., a subsidiary of John Hancock Financial Services Inc., at $54 million. No other third-party marketer was close to the top two.
"It's a good target for third-party marketers, and there is some history here," said Kenneth Kehrer, the president of Kenneth Kehrer Associates.
Third-party marketers "have tried for years to help banks sell life insurance, but the model that they used didn't work," he said. "That model was to have full-time retail agents working at the bank, taking referrals from investment reps and bankers. That model didn't work with or without third-party marketing support. Now we're seeing improvement in selling life insurance through investment reps, and that's largely because of improved wholesaling.
"So I don't agree that the insurance companies aren't good at it. I think there are quite a few that have become quite good at it," Mr. Kehrer said.
Third-party marketers are doing their part, too. Each of the top four had double-digit percentage increases in life insurance sales through banks last year, according to data from the Kehrer firm.
