Banks buying agencies are generally buying into a dying way to distribute insurance, according to the author of a recent study.

The U.S. insurance agency system model is "expensive, unwieldy, and personality dependent," writes Kenneth L. Keith, chief executive officer of Cendant Strategic Marketing Group, which markets insurance to some 4,000 financial institutions, including Citigroup Inc.

Mr. Keith's 19-page study, "Banks and Insurance Marketing: Bankers Have Clean Slate for Mapping Innovative Strategies," maintains that banks have failed to follow up on the Supreme Court's 1996 Barnett decision, which expanded national bank's sales powers, with successful insurance programs.

"Pundits predicted banks would control 25% of the life insurance market by 2000 - an astounding prediction, considering that only 1% of life insurance sales flowed through bank channels at the time," Mr. Keith wrote. Now 2000 is almost here and banks have made little headway, he said.

"Banks must quickly find a business model for selling insurance or jeopardize their share of customers' wallets," Mr. Keith wrote.

Instead of selling through acquired agencies or bank employees, Mr. Keith favors direct-sales methods using call centers, as Geico Corp. and USAA are doing. Their customers can get experts on the phone at any time, Mr. Keith said.

"I think that is the wave of the future," Mr. Keith said. "It's just so much more consumer-friendly."

Flaws in the agency model are partly responsible for the drop in the number of insurance agents, from 249,000 in 1981 to 193,000 in 1996, Mr. Keith added. That trend will continue as more customers choose the ease of using the phone to get expert answers and apply for insurance policies, he said.

But bankers who have spent time and money building insurance programs were quick to dispute some of Mr. Keith's conclusions.

John R. Curran is president of the insurance subsidiary of Portland, Maine-based Peoples Heritage Financial Group, which has acquired several New England insurance agencies.

He said agents will continue to play an important and personal role in selling insurance, though banks should use multiple channels.

And though agencies are personality-driven, they are not very different from small banks in that regard, Mr. Curran said. "To me it's still a strong model," he said.

David A. Galvin, who is building a new agency and branch sales force for $1.4 billion-asset Firstfed America Bancorp of Swansea, Mass., said having insurance salespeople in the branches will always be important.

"We have 15 licensed salespeople spread out throughout the branches," Mr. Galvin said. "We definitely think there can be success with these folks involved, as long as you keep a focused and narrow set of products and then support them."

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