As banks weigh options for entering the insurance business, more and more are likely to take the aggressive step of buying an agency, an industry consultant said.

While some banks are starting agencies from scratch or entering into joint ventures with insurance agents, purchases are "the route we think most banks are going to follow," said Ron Summerville, managing director of Bankers Insurance Center in Washington. The reason: Acquisitions give banks swift entry into insurance sales, an established book of business, and instant expertise.

Speaking last week at the American Bankers Association convention here, Mr. Summerville offered a standing-room-only crowd of about 75 bankers practical tips on how to buy an agency - and how to steer clear of a dud.

For one thing, he counseled, "Don't go for the smallest agency in town. One-man operations are the dinosaurs of the insurance business."

The industry's interest in selling insurance has swelled this year, since the Supreme Court affirmed national banks' authority to own and operate agencies in towns of 5,000. Several major banks, including Comerica Inc. and First Union Corp., have been snapping up small-town insurance agencies to help jump-start their sales efforts.

Mr. Summerville said the first step for any bank is to decide where its best business opportunities lie. For instance, banks whose strongest relationships are with small-business owners could focus on commercial insurance; those with an emphasis on mortgage lending should consider agencies that offer insurance for homeowners and title policies.

The next step is to begin identifying potential acquisitions. "They may be your customers," Mr. Summerville said. If so, banks can size up their financials by looking over account records.

Once the field has been whittled down to one or two agencies, it's time to begin determining the business' fair market value. One big misstep is failing to look closely at agents' compensation agreements.

"Top agents may own a piece of their book," Mr. Summerville noted. "Just because you acquire the agency doesn't mean you acquire that piece of the business."

Mr. Summerville said agencies have traditionally traded at about two times annual commissions, but he warned that owners aren't reluctant to angle for more. "The insurance community views banks as potentially deep pockets."

He also admonished bankers to secure an agreement that the agency's owner will stay with the business once the deal closes, since the owner is often the top producer.

But the biggest mistake banks can make "is to continue to run them as an independent agency operation. You need to integrate the agency into the bank" to reap the cross-selling opportunities, he said.

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