In less than a year, a regional bank in New Jersey has become a big player in insurance by cobbling together several independent, mom-and-pop brokerage businesses.

Commerce Bancorp focuses on sales of commercial insurance by its growing team of entrepreneurial employees. The strategy is unusual; most banks cater to retail customers in their scramble to sell insurance in the wake of favorable regulatory rulings.

"We go the opposite way of everyone else," said Vernon W. Hill 2d, Commerce's chief executive.

The insurancebusiness is expected to contribute $25 million to Commerce's revenues next year and account for 10% of its 1998 earnings, Mr. Hill said. The $3.8 billion-asset Cherry Hill company has 70 branches in New Jersey and Pennsylvania.

To gain entry into the business last year, Mr. Hill looked for an entrepreneurially driven brokerage company. The search led him to Keystone National Cos., with $15 million of annual revenues, led by George E. Norcross 3d.

Mr. Hill, who founded Commerce Bancorp in 1973, liked what he saw in Mr. Norcross and made him president and chief executive of the new Commerce National Insurance Services Inc. Within a year, four independent brokerage companies had been acquired.

That included this month's announced deal for Associated Insurance Management Inc., Haddonville, N.J. Commerce projects that its insurance arm's 1998 premium volume will exceed $200 million.

Mr. Norcross said he expects the business to show more internal growth but added that Commerce National remains hungry for acquisitions that include young, entrepreneurial management teams that can make the transition into a larger company.

Mr. Hill said he wants to keep management teams intact while also streamlining the business.

Moving an entrepreneur into a structured environment is challenging, said Valerie Jordan, an insurance and banking consultant based in Belchertown, Mass. "It's a very difficult thing to do because you have cultural things to address. As soon as they come into the bank channel, you have additional regulations."

It is a big challenge to meet the regulations and continue to operate in a more freewheeling manner, she said.

"The culture here is so much different from any other institution's," Mr. Norcross said. "I am an entrepreneur to the core. The experience in this culture has not been one I've had any second thoughts about."

He explained that Mr. Hill's philosophy is to make everyone part of the team through incentives that go well below senior management. With stock options and other plans, employees gain the benefits of their successes.

Still, Mr. Hill expects that some of the newcomers will go out on their own again. "With entrepreneurs, there's always a risk, over time, that you're going to lose the best 5% or 10%," he said.

The brokers, typically in their 40s, find the support services of a larger institution to be a big benefit, Mr. Norcross said. Big departments can supply three computer experts for a problem or provide marketing assistance to free the brokers for sales, he said.

Seeking entrepreneurs isn't the only unusual aspect of Commerce's entry into the insurance business. The banking company is looking more toward commercial insurance than retail for growth. "We decided when we wanted to go into this business we didn't want to be a mass market business living off the bank's accounts," Mr. Hill said.

Consequently, it is selling every type of insurance to commercial customers.

"There are opportunities on the corporate side," Ms. Jordan said, "to be able to give your customers some value-added by offering various bank programs to them."

Of Commerce's 38,000 insurance customers, about half are commercial. And of this group, Mr. Norcross estimated that about one-third are businesses with less than $50 million of annual sales.

About 85% of bank insurance sales are annuities and life insurance, according to industry statistics cited by Mr. Hill.

Those retail sales "just scratch the surface of what you can do in the business," Mr. Norcross said. "I just think banks around the country don't understand the business before getting into it." He said most banks just look for retail products to peddle but predicted, "That's going to change."

Of the $25 million in insurance revenue expected next year, Mr. Hill said he sees $12 million coming from commercial and government insurance, $6 million from employee-benefit plans, $5 million from consumer insurance, and the rest spread among a variety of products.

Commerce National's focus is on small and midsize businesses, and it wants to sell insurance of all types, Mr. Hill said.

Ms. Jordan said she likes the market's prospects, but she pointed out that it takes more time for Commerce to sell a company's owners and then its employees than it does for larger insurers.

Through the acquisitions, Commerce National is now the largest provider of municipal, county, and state insurance in New Jersey, Mr. Hill said. Besides this specialty, the acquired agencies are strong in employee benefits and managed health care. Mr. Hill would like to see these specialties expand as the company pushes into new geographic areas. But he isn't ignoring any market for insurance, he said.

To get better deals for customers, the banking company has asked its major underwriters to put an employee in every office. "The fight for revenue is so severe, and we want that premium dollar," Mr. Norcross said. "We can negotiate much better face to face." The underwriter pays the tab for the additional staffing.

"Our goal is to redefine the insurance brokerage industry as we've known it," Mr. Norcross said.

One step that Commerce, which bills itself as "America's Most Convenient Bank," has taken is to provide 24-hour, year-round telephone access to senior executives. In a few weeks, any commercial or small-business customer will be able to reach a senior executive to solve problems.

Many customers come home from work and have kids to care for, making after-hours conferences very convenient, Mr. Norcross said. Insurance is used when a customer experiences a loss, he said, so it's important to the customer relationship for executives to be available.

Besides access and service issues, Mr. Hill said, the growth of the company lets it reduce its prices. "In this environment, the bigger the brokerage is, the more market power you have," he said.

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