It has been a more than a year and a half since the Supreme Court, in a case involving Barnett Banks, ruled that national banks can market insurance from small towns. In that time, dozens of banks have either entered the noncredit insurance business or expanded previous offerings.

But what are the critical factors needed to forge a successful banking insurance program?

We put that question to four leading lights in the world of bank insurance-a small-bank CEO; a retail executive at a large bank; and two consultants.

Here are their responses:

Vernon W. Hill 2d

Chairman and president,Commerce BancorpCherry Hill, N.J.

To be successful you need strong market position, skilled talent, and tight integration into the bank.

A strong market position is important because you don't want to be a little insurance agent in a big market. One of the keys to our success is that we are a dominant agent in our market.

Also, unless you're selling a mass-marketing product, you need skilled people to match clients with insurance markets.

And lastly, you need tight integration into the bank. Any specialized product you sell, it means you have to get all the components of the bank talking and that's the hardest part.

Kenneth Kehrer

Kenneth Kehrer AssociatesPrinceton, N. J.

Certainly a key attribute is integration with the bank. For insurance to work, it's got to become a core product.

Chase Manhattan is clearly moving in that direction. For example, they are now training bankers in the branches to sell life insurance and they have developed a joint venture to start selling insurance to small and middle-market businesses.

Another key attribute is that the bank has to think through the economics of their offer and understand what the consumer-value proposition is.

Generally, banks have entered this business on a me-too basis. There seems to be low consumer-value proposition beyond some nebulous notion of convenience.

David Kaytes

Managing director,First Manhattan Consulting Group

New York

Banks need to develop an effective market segmentation model.

People buy insurance differently than they buy conventional banking products, and they are guided by different life triggers. Most banks don't have a clue about what motivates customers to buy insurance products. As a result, they are misjudging customer needs and their purchase behavior.

It's also important to have a differentiated product. The problem in the past is that banks have tried to sell the same product at the same price that is available through an insurance agent. Banks need to assemble solutions for people's insurance needs.

For example, banks should say, "If you get a mortgage with us, you will need these five policies. We will get them processed for you, instead of having to go and apply for five different policies-homeowner's, title, mortgage insurance, flood, or earthquake."

Richard C. Hartnack

Vice chairman,Unionbancal Corp.San Francisco

First and foremost you have to have a good sales and marketing organization, because many types of insurance are sold, not bought. Lie insurance has to be sold. It's an education process, helping the clients to understand what their needs are. At the end of the day, insurance is pretty expensive.

You also have to have products that are appropriate to the segment. You don't sell high-risk products to 60-year-olds with good driving records. It's important to match the right product to the right customer.

It's deciding what segments you want to serve. USAA has proven that you can drive a service element into insurance. The service is so good that I don't think that anyone shops for price.

There is no natural law that would prevent a bank from being successful, but the track record of stepping into a new line of business and doing well is limited.

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