U.S. banks could double the profits they make on each customer if they integrate insurance sales with their core products, a recent study found.

The integration of insurance into a bank's core product menu, or bancassurance, has been successfully done in Europe for years.

Insurance provides the biggest growth opportunity for banks competing for customers' business, according to the study by the Bank Administration Institute and Boston Consulting Group.

The study, "Putting it Together: Convergence Strategies for Banking, Insurance, and Investments," was released this month.

"Insurance products represent the best-if not only - strategy to reverse the fast-declining profitability and 'share of wallet' of their customer businesses," according to the study's summary.

Fifty percent to 75% of bank retail customers do not generate a profit, the study said, and it costs banks an average of $2,500 to acquire each new customer. That's twice the cost of customer acquisition in 1993.

Banks must act quickly because the window of opportunity to capitalize on growth in insurance may close in five years, said John Garabedian, the Boston Consulting Group vice president who oversaw the study.

Banks have missed opportunities in investment products, where they have won a small share of the market and are holding a largely defensive posture, he said. But it doesn't have to be that way with insurance, Mr. Garabedian said.

The Citibank and Travelers Group deal is a bold step, he said. While other banks are merely contemplating the business, Mr. Garabedian said, Citigroup is experimenting with strategies and learning how to make it work. "Banks have to find a way of creating value for consumers and reducing costs, particularly in life insurance," he said.

The study shows that the costs for European companies that follow the bancassurance model are 50% to 70% lower than those of independent agencies. But to achieve similar savings, banks in the United States need to simplify products and save on prospecting costs by leveraging their huge customer bases, the study found.

European banks have simplified their product array by limiting core product structures that are offered, the study found. That allows each European bank employee to manage 10,000 policies compared with the 2,000 managed by employees at traditional insurers.

"The European bancassurance model is compelling in that the focus is on the customer as opposed to product silos," Mr. Garabedian said. He said European banks look at customers' needs first and then view the technical challenges of meeting those needs.

U.S. banks need senior-level commitment and a branch-based network to serve middle-income customers, as well as setting aggressive goals and the objective of meeting all the basic financial needs of customers, he said.

Mr. Garabedian said banks also need to work on building their brand even while forming joint ventures with insurers.

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