Berkshire Bank in Pittsfield, Mass. has taken a different approach to getting into the insurance business.

Instead of buying an insurance agency, the Berkshire Hills Bancorp subsidiary has built its own — with some help from Banc Insurance Services Inc. Berkshire Bank’s new Gold Leaf Insurance Agency opened its doors Sept. 18. It offers a full range of insurance products, including auto, homeowner, life, business, and long-term-care coverage. The agency is a wholly owned subsidiary of the $968 million-asset bank.

Banc Insurance Services, of Springfield, Mass., is a back-office outsourcing partner that uses its agents, technology, and carrier relationships to help smaller community banks to build agencies.

“Like a lot of banks out there, we looked at how we might enter the insurance business, and we looked at all the different options,” said John A. Davidson, senior vice president of Berkshire and president of Gold Leaf. “We chose to create our own agency, primarily so that we could retain control of our customers.”

Instead of taking the platform route, Gold Leaf operates primarily through an “800” number that connects consumers with licensed Banc Insurance Services agents, Mr. Davidson said. Information and marketing materials about the products are made available at the bank’s 11 branches.

In some cases Gold Leaf will send an agent out to visit a client, but in most cases the client contact will be done over the phone.

“Our goal with the insurance agency is to try and make acquiring insurance a little easier for customers and hopefully be able to save them some time and money,” Mr. Davidson said.

The bank earns commissions on the insurance sales made through Gold Leaf and pays a part of it to Banc Insurance Services. Gold Leaf will also pay a flat fee to Banc Insurance Services over the next five years for setting up the agency.

Jeffrey C. Chesky, president of Banc Insurance Services, said outsourced insurance subsidiaries are “going to be one of the most rapidly emerging solutions for community banks” that want to sell insurance. “The bank gets to offer a very sophisticated insurance solution with a very modest capital investment and virtually none of the risks associated with buying a local insurance agency,” he said.

Banks that buy an insurance agency are often surprised when they lose money, Mr. Chesky said. These banks tend to run into financial difficulty because of the capital outlay required, the need for the agency employees to stay in their jobs, and the lack of training and education that would help motivate bank employees to cross-sell insurance, he said.

Berkshire’s partnership with Banc Insurance Services provides economies of scale for the bank in terms of access to insurance products and services, Mr. Chesky said.

Banc Insurance Services negotiates Gold Leaf’s product contracts in concert with the several other banks with which the company works, but each bank’s agency is run as a separate financial entity, he said.

The company also currently runs agencies for Middlesex Savings Bank in Natick and Bridgewater Savings Bank of Bridgewater, and Mr. Chesky said he expects to have 10 New England bank-owned agencies up and running by yearend.

Mr. Davidson said that Berkshire’s arrangement with Banc Insurance Services permits the bank to provide a wider range of products but still focus on its core banking services.

“The bank’s main objective is always going to be to provide financial services,” he said. “Our primary focus will continue to be the traditional bank products. We view insurance — and in the not too distant future, an investment arm — as being just value-added services that our customers can take advantage of.”

Berkshire intends to open a brokerage subsidiary later this fall, he said.

Despite being brand new, Gold Leaf has already sold some policies, though Mr. Davidson said it was too soon to discuss any meaningful numbers. “The response both from employees and customer to date has been, I think, surprising,” he said. “There’s been a lot of interest, and we’re very pleased.”

Berkshire Hills converted to a stock ownership in June and is now traded on the American Stock Exchange.


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