Life insurance remains a relatively small business for most banks and thrifts, but many institutions say it's a promising revenue source.

Thirty-six percent of 38 large banks and thrifts surveyed by Bank Insurance Market Research Group, Mamaroneck, N.Y., said life insurance sales were the single most promising prospective revenue source, followed closely by mutual funds, 28%, and variable annuities, 19%.

Still, the survey found that bank life insurance sales had declined in recent years - a signal that banks haven't figured out how to sell the product effectively, said Andrew Singer, the research group's president.

Life insurance "is a more difficult sale to make and a whole new ball game for banks," Mr. Singer said. "It takes a lot of time, and you have to have someone well versed in the product to sell it."

The study tracked life insurance sales at depository institutions with assets of $190 million or more from June 1994 through the end of September 1995.

Of those contacted, the 10 biggest sellers of life insurance booked $11.7 million of premiums during the period, compared to $24.8 million for January 1993 through March 1994, the last previous period surveyed.

A thrift that had reported $10 million in premiums in the earlier study did not participate in the current survey, Mr. Singer said. Even so, he said, life insurance sales were stagnant. In a study released in 1992, banks booked $23.2 million of premiums.

Timothy J. King, president of Norwest Insurance Inc., Minneapolis, said life insurance sales at his bank have "grown year over year." He would not disclose sales figures. Norwest has been grandfathered to sell insurance since 1929.

In the survey, the top 10 sellers of fixed and variable annuities booked $2.69 billion of sales, 14% more than in the survey released in 1994 and 42% more than in the 1992 study. Annuities take less time to explain to consumers, so they are a quicker sale, Mr. Singer said.

Joseph A. Alberti, president of Firstar Insurance Services Inc., said banks have trouble attracting qualified insurance agents.

"A seasoned life agent is probably making six figures," he said. "What do I have that I could offer those people?"

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