No longer able to ignore a major source of non-interest income, a third of the nation's banks now contract with insurance carriers to sell insurance products, and they may soon be able to underwrite their own policies. This trend has even produced a new breed of consultants dedicated to delivering innovative solutions to help banks sell multiple kinds of insurance.

One such consultant, Robert Grasing, evp of Robert E. Nolan Company in Simsbury, CT, says that eventually every bank could sell one or more insurance products to every one of its retail customers and a good portion of its small business customers. "The size of a bank's customer base and its capacity to handle the new work load are the only limitations," he says.

A bank's commissions can be lucrative: 50 percent of first year premiums on life insurance policies and 17 percent on property and casualty, sources say. "Banks need to hook up with insurance carriers that match their strategies and need an efficient staff to handle the sales calls," says Grasing, who is helping Chase's insurance subsidiary, Chase Insurance Agency, improve its customer service and operational performance systems.

Chase uses ithink, artificial intelligence software by High Performance Systems of Hanover, NH, to determine future work loads by day and time, and thus minimize the costs of hiring staff, scheduling, and meeting insurance customer needs. An agency management system by Agena Corp. of Bothell, WA, eliminates paper by transmitting electronic data directly to the bank's 80 insurance carriers.

Chase's 25 million customers produce more than $800 million of premium annually. Grasing says integrating insurance sales with its basic banking strategy is part of this success. The subsidiary's systems for generating sales leads and servicing policies can interface with Chase's sales force and Internet capabilities; the retail division is allocated a portion of the earnings. The goal is to sell an insurance policy to at least one of every five Chase banking customers. It's beneficial to get executives from other business lines to help out. "A mortgage banker will get involved if you can allocate some of the earnings from insurance product sales back to his division," says Grasing.

Coverdell and Co., a small company based in Atlanta, has helped several banks, including First Chicago NBD and Salem Five Cent Savings Bank, of Massachusetts, sell insurance cost effectively over the Internet. "We can integrate insurance product sales with home banking platforms and build a Web site with several components," says Mike Levison, Coverdell's president. "A visitor to the site can calculate how much life insurance he will need, get quotes from a dozen carriers and initiate the preapplication process." Coverdell offers the service to a bank for $7,000 to $15,000 up front and a monthly maintenance fee of $200 or $300.

U.S. banks have traditionally been limited to underwriting title insurance and selling insurance carriers' products through branches. But that's changing. Congress is currently considering legislation that would allow banks to affiliate with insurers in holding companies which would then be able to underwrite and sell most types of insurance.


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