Traditional life insurance agents' lead in policy sales will continue to narrow as banks, financial planners, and stockbrokers play catch-up, a Conning & Co. study predicts.

Though traditional life insurance agents were responsible for 79% of life insurance sales last year, that will drop to 68% by 2003, according to the study, "Life Insurance Distribution Strategies: Testing the Waters 1999."

The Hartford, Conn.-based research and consulting firm surveyed 35 life insurance underwriters, whose sales accounted for 27% of the industry's 1997 ordinary life premiums.

Traditional insurance agents, those Conning defines as agents working with one underwriter, will continue to lose ground as underwriters look to build sales in other channels, the study says.

Conning put 1998 life insurance sales by banks, financial planners, and stockbrokers at $11 billion, or 14% of all sales. By 2003 that group will sell $22 billion, or 20% of all sales, Conning projects.

"Many carriers admit that they do not know how the ultimate success of these channels will play out over the next few years, but they do not want to miss out on potential winners," Mr. Trencher wrote.

Banks have not yet proven themselves in life insurance sales. The bulk of 1998's $11 billion came from financial planner insurance sales, with only about $1 billion coming from banks, he said.

But banks are poised to meet the insurance needs of middle-market customers, defined by Conning as those with household incomes of $30,000 to $60,000, Mr. Trencher said. Surveys have repeatedly reported that 15% to 25% of customers are likely to purchase life insurance through a bank, the study said.

Banks have the customers, the customer data, and the branch networks, Mr. Trencher said.

But branch networks have been underutilized in insurance efforts, Mr. Trencher said. Leveraging branches for insurance sales is a challenge since banks have been "trying to kick people out the door" with ATMs and technology, he said.

Balancing branch networks with technology will be important for banks, he said. "The more successful banks will use their technological tools" to attract customers and sell them insurance, Mr. Trencher said, "rather than simply dealing with branch office walk-ins."

But banks' opportunity to sell insurance to the middle market has drawn underwriters' attention, he said. The study found that 31% of underwriters saw banks and other financial firms as a significant challenge to traditional agency systems. Forty-nine percent said the threat was moderate, while 20% said it was minimal.

"There's really a lot of uncertainty about how this is going to play out," he said.

Mr. Trencher said underwriters are looking to work in the new distribution channels rather than fiercely protecting in-house agency forces.

"I think the agents understand that the world is changing," Mr. Trencher said.

And even agents are changing, he said. Agents are not only working in the new channels, he added, they are also working in multiple channels in some cases.

Those that survive will have an entrepreneurial bent and do things like embrace the Internet as a source of leads, he said.

Mr. Trencher said one agent he interviewed first gave him a card with an insurance company's name. Later in the interview, the agent produced a second business card with the name of a stockbrokerage firm on it.

"The days of insurance company's having large staffs of career agents is almost gone," Mr. Trencher said.

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