A few years ago most banks had meager appetites for building full- fledged insurance operations, but the events of 1998 suggest this is changing.

Once content to offer a single type of insurance to retail customers, banks are broadening their products and their customer base.

"There is a recognition now that banks will need to be involved in insurance across the board," said Glen Milesko, president of Bank One Corp.'s insurance unit.

Banks have awakened to the importance of small- and midsize-business customers. Businesses have many high-priced insurance needs, ranging from property and casualty to life insurance on their top executives.

Chase Manhattan Corp. may have set the standard, offering its business customers various employee benefits through a partnership with USI Holdings, a leading brokerage.

Banks such as Commerce Bancorp, Cherry Hills, N.J., and BB&T Corp., Winston-Salem, N.C., increased their exposure to business customers, in part because of acquisitions of independent agencies with strong commercial property and casualty businesses.

"There is clearly a greater awareness of the commercial side of the insurance business," said H. Wade Reece, the president of BB&T Insurance Services, a unit which bought five agencies this year.

This year saw a number of insurance underwriters look closely at the bank channel for the first time. In September, John Hancock Mutual Life, Boston, announced it was building a bank sales force. And Unum Corp., Portland, Maine, the nation's largest disability insurer, formed a business unit to sell through banks.

On a sour note, variable annuity sales at banks, which had been growing steadily through most of the 1990s, fell 12.5% in the third quarter, because of the stock market's drop.

For the year ahead, expect the growth of property and casualty insurance at banks to continue to outpace life insurance, according to Datamonitor, a research firm. And look for banks to add intriguing elements to life insurance products, such as features that cover long-term care.

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