The House Banking Committee recently approved bills to reform the Glass-Steagall Act and reduce the burden of regulation on banks. The independent insurance agents and their friends in the House leadership are blocking a floor vote on the bills unless provisions are added to curtail the authority of banks to offer insurance products.

A white paper published recently by the Financial Institutions Insurance Association couldn't be more timely in view of the insurance agents' political machinations. The paper, using data from insurance industry sources, details the overwhelming problems in the current agent-based delivery system for life insurance.

The paper reports that 40% of all Americans have no life insurance coverage, and 65% have no individual coverage. The paper cites a 1993 study by the National Association of Life Underwriters that declares, "There is a $5 trillion shortfall of consumers with basic life insurance needs that don't have any life insurance at all."

The problems are caused by an agent-based delivery system so hugely expensive and inefficient that it simply cannot reach and serve the average American household. The cost of selling a new life insurance policy through the current agent system is estimated to be 175% to 200% of each dollar of new premium.

Traditional agents rely largely on one-on-one selling techniques. They focus on the more affluent population segments because they can make more money selling one big policy than 10 small ones.

Among the 10% of households earning more than $75,000 a year, 75% own individual life insurance. Among the 42% of households earning less than $25,000 a year, only 40% own individual life insurance.

The insurance industry is experiencing enormous difficulty in attracting and retaining agents. The number of new recruits has declined for six of the past seven years.

It costs, on average, $120,000 to recruit and train each agent. Yet only one out of every six new agents is still around four years after being hired. Even more troublesome, 28% of agents with more than two years of service drop out of the business annually.

As a result, sales of new policies are down. The number of life insurance policies written annually has declined persistently, from almost 18 million in 1983 to about 13 million in 1994.

Lapses of existing policies are way up, attributable in no small part to the lack of experienced agents to service the policies. From 1981 through 1993, the number of ordinary life insurance policies in force declined from 149 million to 140 million. Almost 202 million new policies were written during this period, which means that a very large percentage of the policies sold or in force during the period lapsed.

Attempts by the government to interfere with the operation and natural evolution of markets are doomed to failure. If we learned nothing else from the savings and loan crisis, we should have learned that much. It is particularly disheartening to see Republicans, who won control of Congress on the promise to get rid of deleterious government restraints, carrying water for insurance agents trying to turn back the clock.

The agents' efforts to stop the march of time will fail, as sure as night follows day. Meanwhile, the agents' denial of reality is not only causing them great harm, it is costing the American public dearly.

There is a better alternative. The agents have a lot of experience and know-how in selling insurance. Banks, generally, do not. Banks have a large customer base and an ability and desire to deliver more services efficiently to those customers.

Cooperative ventures between banks and insurance agents would benefit all concerned, particularly the public. These ventures will take longer to bring about, and the costs involved will be greater, if government policymakers continue their vain efforts to shield the agents from reality.

Lawmakers and the insurance agents would be well advised to heed the warning of the Life Insurance Marketing Research Association: "Sales (of life insurance) have not stagnated because there is no longer a need ... but because we are not giving the public the opportunity to buy it."

Mr. Isaac, a former chairman of the Federal Deposit Insurance Corp., is chairman and CEO of the Secura Group, a financial institutions consulting firm based in Washington.

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