Insurance companies are going on-line, possibly posing a threat to banks seeking to solidify their relationships with customers connecting via personal computer.

Principal Financial Group, New England Financial, and State Farm Insurance Cos. are among those that have launched or are about to unveil PC-based financial services packages.

Like banks' other set of rivals in the securities business, these companies are building transactional Web sites, entering into technology partnerships, and seeking to expand their product offerings beyond insurance.

"Insurance companies have been watching as banks come into their turf, and now insurance companies are looking to get into banking," said Steven Aldrich, president of Interactive Insurance Services, an Alexandria, Va.- based subsidiary of Intuit Inc. that provides insurance information and supports product sales over the Internet.

Although each of the diversifying insurance companies expresses its own strategic motivation, they are all facing the fact that technology is changing the rules that historically compartmentalized the different types of financial transactions.

"Principal had looked for a very long time at being in banking," said Steven J. Ollenburg, president of Principal Bank, which operates under a federal thrift charter approved last November by the Office of Thrift Supervision.

Des Moines-based Principal serves a wide geographical territory that would be costly to serve by building a branch banking network from scratch or by acquiring an institution at current prices.

"The advent and acceptance of automated teller machines, debit cards, and banking on the Internet made us believe that we could deliver a truly viable product," said James L. Jacobson, chief information officer of Principal Bank.

Because of the variety of $67 billion-asset Principal Financial Group's businesses-including a mutual fund company, broker-dealer, and mortgage banking unit-regulators imposed the condition that Principal not accept deposits at its 140 insurance and brokerage centers unless they met regulatory "safety and soundness" requirements.

Principal Bank went the branchless route and will handle transactions exclusively via the Internet, telephones, ATMs, the automated clearing house network, and through the mail. Principal's field insurance agents may, however, refer customers to the bank.

"We intend to be an A-to-Z retail bank, but on a direct basis," said Mr. Ollenburg, formerly president of Liberty Bank in Des Moines. He said the bank is shooting for at least $70 million of assets within three years. He hopes for much more, particularly by appealing to Principal's current customers.

The bank has already begun to offer checking, savings, and money market accounts to Principal's 17,000 employees. It expects to ramp up its external marketing after launching on the Internet in April. It will offer free, unlimited electronic bill payments. A credit card will be available in July.

The bank is using Alltel Information Services Inc. of Little Rock, Ark., for core processing, Security First Technologies of Atlanta for Internet banking support, and Travelers Express Co. of Minneapolis for bill payments.

New England Financial, previously known as The New England and as New England Life, has cobbled together an on-line strategy based on alliances with other financial institutions and technology partners.

"We are essentially trying to accomplish banking capabilities by joint venture rather than actually being a bank," said Stephanie Brown, senior vice president of interactive financial solutions for Boston-based New England Financial, a $1.6 billion-asset unit of Metropolitan Life Insurance Co.

The company plans in April to begin pilot testing its modified version of Meca Software LLC's Managing Your Money. The personal financial management program would let customers buy and view accounts of a variety of financial and investment products.

Investment accounts will be offered through its brokerage, New England Securities. And a New England Financial credit card will be offered through Banc One Corp.'s First USA subsidiary.

Meca Software itself is a joint venture of which New England Financial is the only nonbank owner.

The other six owners-BankAmerica Corp., Citicorp, Fleet Financial Group, NationsBank Corp., Royal Bank of Canada, and U.S. Bancorp-have customized the desktop software with their own branding. New England Financial has made extensive additions to the product, including an insurance organizer feature.

Rather than following the direct bank model that minimizes human contact, New England Financial executives see their electronic product enhancing customers' relationships with insurance agents and financial advisers.

"The personal financial manager is really designed to broaden the relationship that we or an adviser would have with a customer that spans banking, investment, and insurance," said Ms. Brown.

One goal of the pilot, to be conducted in six cities in preparation for a national launch later this year, is to answer questions about how best to utilize New England's 76 agencies and 2,500 representatives in distributing the software and in facilitating e-mail communication with customers.

A common "800" number for technical support and all financial service questions will eliminate what company officials described as the chaotic impression given by other companies providing on-line financial services.

A robust, well-supported personal financial manager, said Ms. Brown, will "keep competitors from moving into our space."

"Banks, brokerage firms, and even software providers like Intuit and Microsoft are providing vehicles that are helping consumers to plan, manage, and track their financial affairs, rather than looking at them in a stovepipe fashion," she said.

New England's version of Managing Your Money will connect to the Internet for brokerage and insurance information. Electronic banking and bill paying will be handled through a dial-up connection to Checkfree Corp.

That insurance companies are interested in banking comes as no surprise to industry observers.

"Banking has been much more profitable than insurance for the past several years, so it is natural that insurance companies want to get into that business," said Kenneth Kehrer, a Princeton, N.J.-based consultant and insurance industry expert.

"There is clearly a significant and growing segment of the population that is interested in financial electronic commerce," said Mr. Kehrer. "The odds are that there are people who want to do all their financial business that way."

Among the current wave of insurance companies with pending thrift charter applications to create retail or direct banks, State Farm Mutual Automobile Insurance Co. is considering using the Internet for banking-type services.

"We are still planning to use agents as the center of our marketing, but we want to be available to our customers through various points of contact," said Bob Reiner, manager of interactive marketing for the Bloomington, Ill., insurance giant.

"If they want to get us via the Internet, we need to be able to provide service on the Internet," he said.

To strengthen customers' connection to agents, State Farm last year began bundling insurance agents' photographs and contact information with Intuit's Quicken personal financial management software.

Prudential Insurance Co. of America is considering offering various electronic services through its Prudential Bank and Trust subsidiary.

"We don't have the bricks and mortar that a Chase or Citibank has," said Stephen P. Ilnitzki, vice president of marketing at the $196.1 billion- asset insurer in Newark, N.J. "Given that we are not going to turn into them anytime soon, we are strategically discussing electronic commerce capabilities that make sense."

Prudential offers account access over the Internet, and its life insurance division works with Intuit's insurance information subsidiary to generate referrals for agents.

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