Banks are best suited to sell insurance to the young and nonaffluent, according to a recent study, and that's where they should focus their marketing efforts.
These groups are receptive to buying insurance through banks and are generally underserved by traditional insurance sales channels, said Mary Ann Godbout, assistant vice president at Conning & Co. and author of the study.
The study by Conning, a Hartford, Conn.-based insurance and asset management research firm, found that nonaffluent consumers rated banks as the most trusted "financial channel." Insurance firms were rated second. By contrast, affluent consumers rated banks third and insurance companies fifth. "This sends an important message to banks and insurance companies," Ms. Godbout said. "It's easier to sell to those who are already receptive. They (banks) may never change preconceived notions."
Banks have certain inherent characteristics that make them attractive venues for insurance sales, according to Ms. Godbout's study. They have frequent customer contact established relationships with customers, and a high level of trust. Moreover, banks are often involved in transactions that present opportunities for people to buy insurance, like mortgages.
But banks can also be at a disadvantage when it comes to selling insurance, Ms. Godbout said. They lack experience selling potentially complicated products, and employees often have little incentive to sell insurance. A customer who is dissatisfied with an insurance claim, or someone rejected by an insurance company, may project his or her negative experience on the bank where the insurance was originally bought, Ms. Godbout said. Still, bankers who sell insurance think they have something to offer customers.
Andrea Martin, president of Comerica Insurance Services, Detroit, said selling insurance can add value to existing customer relationships.
While lower-market customers may be underserved and more amenable to buying insurance through a bank, Ms. Martin said, it is still important to have a low-cost distribution program in place to market to these less lucrative customers. "Sending agents door-to-door to sit at someone's kitchen table is expensive" for the low premiums a $10,000 term life policy will yield, she said. Comerica markets insurance by telephone to young and nonaffluent customers.
Even though banks potentially have much to recommend them as places to sell insurance, Ms. Godbout conceded that people nonetheless may have to get used to the idea. "I'm not sure consumers are ready for it because they don't have the expectations" of buying insurance at banks, she said. She urged banks to start laying the groundwork today to sell insurance, then, when younger people who are already receptive to the idea reach their prime insurance-buying years, the banks will be ready to sell.
