Banks' efforts to do business with fewer annuity providers have the providers adding flexibility to their bank-sold products, and one result is the emergence of more customization options for people who buy annuities from banks.

This means these consumers can give the product the death benefits and payout options they want instead of having to sort through a host of providers' offerings with limited features.

Kenneth Kehrer, president of the bank-insurance consultancy Kenneth Kehrer Associates, in Princeton, N.J., said that, while unbundling can be good for banks, it isn't perfect. One problem, he said, is that just because a bank wants fewer annuity providers doesn't mean it wants only one annuity from a provider.

Some companies, including Allstate Financial, "are pursuing the strategy of having multiple annuities, so if the customer has a specific need, the rep knows which annuity to turn to," Mr. Kehrer said. "While banks clearly want less companies, the choice of whether they want one product with several options or several products from one company is unclear."

Paul Merritt, senior vice president and national insurance coordinator at Banc of America Investment Services Inc. in Charlotte, N.C., said his company tries to keep its annuity-provider relationships to a minimum. "If you work with 20 different annuity providers, how do you give any of them enough business to have leverage?" he said.

Mr. Merritt said he would rather have a wide assortment of products from a single provider. "I think diversity is the way to go," he said. "I'd never put all my eggs in one basket. I'm not saying you want to pile product upon product, but you want to fill niches and have enough products and options to cover all your bases."

David Fried, president of HSBC Insurance Agency Inc. of Buffalo, N.Y., part of New York-based HSBC USA Inc., said he wouldn't look at his relationship with an annuity provider "in a vacuum."

"What else can they provide?" Mr. Fried said. "For it to be a true partnership, we need to see across what other lines of business we can work with them."

No one company, he said, can give his bank all it wants. "Our affluent customers will have different needs. Non-U.S. resident customers will have different needs than, say, customers who are U.S. residents. We have a diverse customer base, and we need to have a product for each of them."

Several insurers this year have released unbundled annuity products for bank distribution through banks. Security Benefit Group, in Topeka, Kan., a new entrant in the bank channel, recently introduced SecureDesigns, a variable annuity specifically for bank distribution.

Greg Garvin, senior vice president of sales and distribution for Security Benefit, said the annuity's seven riders include a stepped-up death benefit, extra credit options, guaranteed minimum income benefit, guaranteed growth death benefit and a waiver of withdrawal charges. "With the riders, a rep can just plug in whatever the customer needs," he said. "It's the only variable annuity a bank rep needs to have."

Security Benefit had $700 million in variable annuity sales in 2000, $50 million of it through banks. Company spokesman Dana Ripley said it also offers bank representatives a computer program that can help them determine which riders best suit a given customer.

"When a product has that many riders, we don't want to leave the reps guessing, that doesn't make sense," Mr. Ripley said.

Allstate, in Northbrook, Ill., already offers three variable annuities in the bank channel and plans to launch three more for banks in mid-2001 through its Glenbrook Life and Annuity Co. division.

The products will have a twist on unbundling: an "opt-in" feature. Rob Shore, director of Glenbrook's financial institution division, explained that reps will be able to add a specific option to the annuity that might not be part of the original annuity's basic design, if the client wants it.

"We offer several products, instead of one, in case a bank has a fundamental problem with an aspect of a product," Mr. Shore said. "We don't want them to reject the whole product because of a portion of it."

For instance, he said, some banks are against carrying annuities with a bonus.

"If that's part of it, they won't carry it."

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