A thrift opened last week by the National Association of Mutual Insurance Companies is a further sign of mounting competition that bankers face from the insurance sector.

Assurance Partners Bank of Carmel, Ind., led by veteran banker David T. Fronek, plans to operate nationally and expects to have at least $100 million of assets within a few years, a spokesman said.

The trade group is banking on a low-cost, branchless distribution system to challenge community banks on their turf.

"The insurance companies have a lot of clout, and they have a lot of capital, and I think they'll be a serious threat," said John Watts, executive vice president of Michael White Associates, a Pearland, Tex., consulting firm.

Assurance Partners Bank is not the first thrift operated by insurance companies and agents; State Farm of Bloomington, Ill., opened one in March. In addition, the Alexandria, Va.-based Independent Insurance Agents of America is awaiting approvals to open a thrift of its own.

Two hundred sixty-two members of the mutual insurers trade group, which has 1,200 in all, invested in Assurance Partners Bank. Agents of those investors will have the first opportunity to market its loans.

The thrift is now signing up companies and agents who want to participate and training them about the products, Mr. Fronek said.

Initially the thrift is operating in the Indianapolis area, where the trade group is based. Plans are to expand throughout the state in 2001.

The pace of the rollout depends on the regulators, Mr. Fronek said, but the thrift intends to be national within the next few years. "Because the distribution system is new and untested, we have to prove to ourselves and others that we can expand in an orderly fashion," he said.

Though it is getting its start in Indiana, Assurance Partners Bank "is not an Indiana problem or issue per se. It's more of an issue for all community banks," said S. Joe DeHaven, president of the Community Bankers Association of Indiana in Indianapolis. Assurance Partners Bank and other institutions like it are targeting customers in the same communities his members have historically served.

But joining an already crowded marketplace will not be easy, said Mr. Fronek, the thrift's president and chief executive officer and a former executive of First Chicago NBD Corp. "We've got to try to be different," he said, "I think that we recognize that we're a small start-up bank that has to serve a broad number of shareholders in various kinds of markets. That's a unique challenge."

Assurance Partners Bank' purpose is to allow the trade group's members to compete in the financial services arena, he said.

The thrift's primary marketing tool will be the thousands of insurance agents whose companies are members of the trade group. "The identification of a sales opportunity, and satisfaction of a customer need would be through an insurance agent … referring their customers to the bank for a loan product," Mr. Fronek said. "Our model is pretty straight forward.

"The products are primarily targeted and aligned to insurance products," Mr. Fronek said, and include home equity loans, automotive loans, first residential mortgages, and eventually, small business loans. Ideally, he said, agents would to know when clients were looking for such financial products, and would be able to refer them to Assurance Partners Bank.

"Our job is to offer competitive products in terms of rate, product features, and convenient delivery," he said. Acknowledging that many of these banking products - like home equity loans - are similar from institution to institution, he said Assurance Partners Bank is looking to capitalize on the cost savings of operating without a branch system to provide competitively priced products.

In addition, the thrift's founders believe that the use of insurance agents will be a competitive advantage, Mr. Fronek said. "My banking experience leads me to believe there is a greater relationship between an insurance policyholder and their insurance agent than typically there is between a retail customer and the person they do business with at a bank."

He said he hopes that agents will be able to build on that relationship to provide referrals to the thrift. Agents who refer customers will be compensated if those customers buy the thrift's products or services.

Despite the threat to members of the Indiana banking trade group, Mr. DeHaven said he applauds the insurance group's decision to obtain a thrift charter. "I think it's a visionary thing. They've done their members an excellent service."

He said the industry should not be surprised to see banking trade associations following the insurance group's lead and forming their own insurance companies. Trade associations "are going to be becoming surrogates for the formation of these companies on behalf of our members," he predicted. "I think it's going to be a brand new world out there."

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