After 60 years of operating as a thrift-insurance cooperative, Savings Banks Life Insurance Fund of New York is planning a makeover.

Bankers say the organization, now owned by 16 savings banks, is planning to recast itself as a mutual insurance company-a move that would let it broaden both its product line and geographic scope. Right now, SBLI Fund offers only low-cost life insurance, and only in New York State.

SBLI Fund, a fixture on the New York banking scene since 1939, is looking to pull off the change by yearend, bankers said. It would become the first thrift-run insurance consortium in the country to drop thrifts from the ownership structure.

The move has been fueled by consolidation among savings banks, a common type of thrift in the Northeast.

"Because of mergers and acquisitions in the industry, our outlets were declining," said Clifford Miller, the chairman of SBLI Fund and the chairman of Ulster Savings Bank, a $350 million-asset institution in Kingston, N.Y. "We thought it would be in the best interest of the system to change."

Currently 16 savings banks act as issuers and control the premiums customers pay for the low-cost life insurance at SBLI Fund. Another 36 thrifts sell SBLI as agent thrifts. In 1994, there were 29 issuing savings banks and 31 agency thrifts.

Under the proposed structure, SBLI Fund would be available to all customers, not just the customers of participating thrifts.

SBLI Fund disclosed only minimal information about the plans, and last week the fund sent its members a memo asking them not to comment on the plans.

SBLI, a forerunner to the burgeoning insurance offerings of many banks, has its roots in turn-of-the-century Massachusetts. Louis Brandeis, a Boston lawyer who later became a Supreme Court Justice, pushed the concept of affordable insurance for ordinary Americans.

In 1907, SBLI was first sold in Massachusetts and was introduced in Connecticut in 1942. In those states, the SBLI framework has been restructured to form stock companies. However, most of the assets in both companies remain in the hands of the depository institutions.

Under the current structure of New York's SBLI Fund, issuing thrifts maintain separate SBLI departments and control premium assets of customers and those of thrifts acting as agents of the fund.

"The original charter was really to provide insurance coverage for middle-income individuals," said Melvin L. Cebrik, president of Dime Insurance Group. "I think it filled that purpose for many years."

But the charter didn't foresee the consolidation in financial services, or the rise of banks and thrifts as aggressive sellers of a range of insurance products, Mr. Cebrik said.

"At this point I think it's a very good thing for SBLI in terms of retooling itself in the marketplace," Mr. Cebrik said. If the proposed changes occur, Mr. Cebrik said, Dime would evaluate the new company's products just as it would the products of any other insurance carrier.

One SBLI executive at another institution, who asked not to be named, said SBLI Fund hasn't been forthcoming on how thrifts will be affected. Some bankers expressed concern that there would be a gutting of existing SBLI departments when assets are transferred to the new mutual insurance company.

Dime has about 10 employees in its SBLI department but has not made any decision on their future if the mutual company format is approved by members and regulators, Mr. Cebrik said.

Some thrifts that sell SBLI seem genuinely confused about what the proposed changes entail, said one executive at a large insurance company.

However, several industry sources said SBLI Fund has said it would offer products like long-term care and variable life insurance if the proposals are accepted and regulatory approvals come later in the year.

At SBLI in Massachusetts, sales were restricted by the old structure, but it kept savings banks in its new ownership structure when it reformed in 1992.

The changes have been beneficial, said Timothy Carlow, savings bank life insurance officer for City Savings Bank, a $365 million-asset bank Pittsfield, Mass., that has sold SBLI since 1912.

With roughly 60 members, the old structure of Massachusetts' SBLI was cumbersome, he said. Each savings bank had its own established rates for salaries and expenses that were awkward to change.

"There were 60 separate sets of books," Mr. Carlow said.

Having worked with the program before and after the change, Mr. Carlow said it has worked well in Massachusetts. Centralizing the services in a company based in Woburn simplified the structure and freed the company from previous restrictions, he said.

"The way it's structured now is a lot stronger and more profitable," Mr. Carlow said.

At least one New York SBLI executive worries that financial institutions will lose all say in a retooled company. That has driven at least a few SBLI Fund thrifts to get bids from life insurance carriers, while others await details, the insurance executive said.

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