In a rapidly diversifying financial services marketplace, banks are upping the competitive ante by forging alliances with non-traditional partners to offer new investment products and services to retail and small business customers.

Such arrangements give banks the added expertise they require to make precise product selections, conduct sophisticated marketing initiatives and provide customers with efficient, high-quality servicing. In some situations, alliances not only enable banks to sell new products to existing customers, but also to acquire new customers.

At Wachovia Insurance Services, a wholly owned subsidiary of Wachovia Bank, president David L. Holton explains that, in attempting to meet expanded share of wallet goals, his plan was "to try to have one central location and more control over customer service and the execution of market programs."

At the three-year-old agency, however, that wasn't happening-until, that is, Wachovia teamed with Coverdell & Co., a direct marketing insurance firm currently servicing 35 to 40 major banks. Prior to this arrangement, the customer service process was complicated, ineffective and frustrating to both Wachovia and its customers. When a customer inquired about an insurance policy purchased at the bank by a now-deceased policyholder, for example, Wachovia was unable to efficiently assist the heirs who knew the policy existed, but were unable to locate it-and neither could bank officials. Locating the policy under the old system "was a search and destroy mission," Holton says.

The reason: Wachovia sold the products of eight to 15 insurers, often through three or more different marketers. The fragmentation prohibited centralized access and control of customer policy information. To Holton and Wachovia vice president Matt Lievens, centralizing the information was a requirement if customers were to be serviced quickly and effectively. But creating a multi-product, one-stop-shop-and-service environment is "a very specialized business," says Holton, noting that it was beyond the expertise and staffing capabilities of the bank's marketing department.

Thus, recognizing the problems inherent in such a complex operation- which also required extensive supplier contacts, knowledge, and clout- Holton and Lievens set out to find a specialist, in the process looking at more than 10 organizations. They decided on Coverdell, according to its CEO, Michael D. Levison. On April 1, Coverdell, founded in 1963 by Georgia Senator Paul Coverdell, was acquired by Member Works, a Stamford, CT-based firm which direct markets a variety of "club" memberships through banks. These include discount cards for health services, prescription drugs and hearing aids, all products that fit Levison's criteria: consumers are receptive because they have a tangible benefit, and they're simple and straightforward, thus lending themselves to direct marketing. Part of the Coverdell product line, the club memberships are now also being offered to Wachovia customers.

Wachovia chose Coverdell to capitalize on its expertise in direct marketing insurance, include finding, negotiating with and assembling a group of underwriters to provide products. These then are sold via telemarketing, direct mail, and on the Internet-all services which the direct marketing firm also provides to banks.

cleaning up back office

In addition, Coverdell uses one central 800-number to field calls from Wachovia customers and provide information and fulfillment services.

Central to Wachovia's insurance strategy is a multi-faceted sales function which ensures that products are sold and distributed effectively across all bank channels. "Coverdell recognizes that direct marketing is just part of an overall strategy that major banks develop for the insurance business," says Levison.

For instance, multiple customer categories require differing sales tactics and sales forces. Affluent retail customers, for example, can't be sold by mail or telephone. They require face-to-face contact with highly trained agents.

But there is a growing, potentially profitable customer base willing to buy life and health and property and casualty insurance remotely. It's selling to that segment that Coverdell has taken on for Wachovia, functioning within the bank's organization and under its control. "The marketing firm functions almost as part of our staff," Lievens says. "We call the shots."

The outsourcing program began in the first quarter of this year. It makes sense, Holton says, because "there are peaks and valleys when you send out mail"-rendering it unnecessary to keep staff on all the time. What's more, when customers inquire about insurance products, agents must be licensed in that customer's state to make the sale.

For Wachovia, retaining Coverdell also addressed the complexities of initiating new programs. "It's not a unique concept for a bank of our size," Holton says, adding that what is unique is the selection of "one primary third-party marketer, one common set of standards." Adds Lievens: "Most programs are tied to a product or to a carrier; Wachovia's marketing management is "designed around a process, not a product, to maximize customer portfolios."

Wachovia is betting that when its selling and servicing process is more efficient, more customers will buy.


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