FirstMerit Corp. of Akron, Ohio, is getting into commercial insurance through a joint venture with a large independent insurance agency.
FirstMerit has teamed up with James B. Oswald Co. of Cleveland to create FirstMerit Commercial Insurance Agency. The agency will market commercial property and casualty, employee benefits, and health insurance to the more than 35,000 business customers of the bank.
This is not FirstMerit's first venture into insurance. The $9.2 billion- asset bank sells viaticals-a form of life insurance-and has a shell of an agency through a bank it bought.
But it is the banking company's first shot at a broader insurance effort.
FirstMerit will steer clear of an extensive personal insurance program, said Felice L. Larmer, chairman of FirstMerit Securities.
"I didn't want to jump into the personal lines business because I didn't want to build it and I didn't want to buy it," said Ms. Larmer, who has worked in KeyCorp's insurance management group. "But I did realize that I had a strong community lending department."
To take advantage of that, Ms. Larmer looked for an agency with the experience to serve commercial insurance accounts. Oswald had the track record plus a commitment to working with banks, she said. The agency had proven that by hiring a banker to run its Oswald Financial Inc. unit, Ms. Larmer said.
The banker, Steven Kinner, also worked at KeyCorp; he left in 1997 after a 20-year tenure.
That background helped open some doors with commercial lenders, Ms. Larmer said.
"I worked closely with Oswald and we went in with a presentation that sounded like bankers," she said. "The lenders are actually encouraged - and commercial lenders tend to be territorial."
Both Ms. Larmer and Mr. Kinner said it is too early to judge the results of the initiative, which has been under way for about a month. But Mr. Kinner said the first agent dedicated to the effort was given 14 contacts by the bank's commercial lenders. Eleven of those business executives agreed to meet with the agent, Mr. Kinner said.
The agency plans to add two agents within 60 days and another two when the program is fully up and running, he said. Agents, who are trained to make no-pressure sales calls, will call on customers with bankers and work through referrals. The effort will also be publicized through an existing bank newsletter and statement stuffers, Mr. Kinner said.
For now, FirstMerit is only testing the program in the Cleveland area. Ms. Larmer said she'll judge the new program on two counts: "If lenders are retaining accounts and adding another service for customers and (if) I want to make some money at it."
With the low overhead the initiative will be profitable, she said. But she declined to discuss revenue expectations until studying the pilot program's results.
"We both realize that it takes a three- to five-year range to develop a significant revenue flow," Mr. Kinner said.
Oswald has two other bank partners that Mr. Kinner declined to name.
He said the company, which has offices in Cleveland and Fort Myers, Fla., is looking to bring its expertise in both commercial and personal lines to banks that have about $1 billion to $10 billion of assets.
Smaller banks can sell insurance but also generate modest revenues, he said.
