Insurers, whose efforts to enter banking had been spotty at best, showed real signs of progress last year -- with the biggest successes coming from companies that used a captive sales force.
State Farm, which formed its own thrift and rolled out banking products nationwide to thousands of "captive agents" who are contract employees was perhaps the strongest growth story of the year.
Groups like the National Association of Mutual Insurance Companies and the Independent Insurance Agents of America, meanwhile, have also started thrifts but must sell through independent agencies, which has limited their growth.
And industry behemoth MetLife Inc. used a tiny national bank it bought in early 2001 to introduce banking products to its own employees - with the eventual plan of selling more broadly to consumers.
Though it is too early to truly assay the success of these ventures, according to Carmen Effron, president of the bank-insurance consulting firm C.F. Effron Co. in Westport, Conn., the trend is clear. More underwriters are taking the leap into banking or expanding their existing operations, she said, and they will continue doing so in 2002.
Stan Ommen, president and chief executive officer of State Farm Bank, said the thrift is a "success story" for the Bloomington, Ill., insurance company, which got its thrift charter in 1998.
"More than 90% of our agents across the country have chosen to become bank-trained," Mr. Ommen said, "and the majority of our customers are coming to us through the agent relationship." About 14,000 agents have been trained, in all, State Farm said.
State Farm Bank has just passed the $1.2 billion-asset mark, and it has agents in 47 states and the District of Columbia trained to market loans, deposit accounts, credit cards, and banking services to customers.
The thrift intends to have its New Jersey agents trained early this year. It lacks insurance agents in Massachusetts and Rhode Island.
Mr. Ommen acknowledged that getting consumers to turn to agents for banking products requires education and marketing efforts but added that people are eager for another banking option.
Consumers are drawn both to the local presence and recognizable face of their State Farm agents, Mr. Ommen said, and to the perceived stability of the company and its brand.
"To some degree people have a feeling that State Farm is not going to be changing its name, not going to be sold out," Mr. Ommen said, unlike many community banks that have been gobbled up in recent deals. State Farm also offers competitive rates, he said.
The thrift will add a debit card this year, Mr. Ommen said. It already has Visa and ATM cards, he said.
"We kind of look at 2002 as being a transitional year for State Farm Bank," Mr. Ommen said. Now that nearly all the agents are trained, he said, the thrift wants to focus on ingraining bank-product marketing in the agents' daily routines.
Insurbanc, the thrift chartered by the Alexandria, Va.-based Independent Insurance Agents of America, opened its doors in April in three states - New Jersey, Massachusetts, and Connecticut - and now has $14 million of assets, according to Michael W. Herlihy, the thrift's chief executive officer.
It is designed to sell insurance products through the independent agencies that make up the IIAA's membership, he said. During its start-up, the thrift sought out the agents themselves as customers and only began seeking "referral business" to the agencies' customers in October, he said.
Growth has been a little slower than the thrift had anticipated, Mr. Herlihy said, because of the education effort required to get the agents actively involved. However, he said, 250 agents, from 100 agencies, have gone through training.
He said that, since it is harder for businesses such as agencies to switch banks than it is for individuals, the process can take a few months. However, he said late last month, the thrift was expecting a number of agencies to change over to Insurbanc after they close the books on 2001.
Developing agent referrals will take time and effort, he said.
"In order for an agency to do it right, they really need to develop marketing plans," Mr. Herlihy said, so the thrift is working with them to help market products to agency customers.
The customers themselves need educating about the products that are now available at their local insurance agencies, Mr. Herlihy said, and this takes time. Most people, he said, are less familiar with the idea of financial services convergence than are those in the industry.
"What we think is hugely groundbreaking and important, the average consumer really hasn't, No. 1, tried to understand, or No. 2, seen the effect of," Mr. Herlihy said.
However, he said, "for a commercial lines agent it's an easier transition."
Commercial clients are more sophisticated and more knowledgeable about banking and insurance, he said, which makes it easier for them to consider new ways of getting financial products and services.
However, Mr. Herlihy said, an important part of the thrift's mission is to serve the agencies themselves. And though he expects growth in referral business this year, he said he believes agencies will continue to make up most of the thrift's customers.
Mr. Herlihy said the thrift's plans call for adding $30 million to $40 million of assets in 2002.
The National Association of Mutual Insurance Companies' thrift, Assurance Partners Bank of Carmel, Ind., is also looking to add assets in 2002, according to president and chief executive officer David Fronek. He said the thrift hopes to at least double its asset size this year, from $17 million.
Assurance Partners markets banking products through the agents that work with its member companies, who are primarily small and midsize property-casualty insurers. Nearly 300 agents have been trained to sell banking products.
Mr. Fronek said his thrift got a boost last fall from lower mortgage interest rates but is looking to expand its business banking operation in 2002 and find new sources of fee income.
"Typically it's the consumer lending business which we're primarily promoting through agents," Mr. Fronek said. However, the thrift would like to expand its business banking services, for example, by offering acquisition financing for member insurance companies.
The thrift's merchant card processing services have been very popular with the insurance carriers and agents, and it wants to build on that success, Mr. Fronek said.
He added that Assurance Partners is also considering fee revenue producers like investment management or trust services but has no concrete plan to add these products this year.
"The financial services industry convergence is happening at a slower pace than was anticipated back a few years ago," he said, "but we still feel we've made some inroads."
Thrifts such as these three - which sell banking products through an existing network - have a cost advantage over more traditional banks, Ms. Effron said. "They're not spending huge amounts of money buying additional bricks and mortar," she said, because the agencies that act as branches already exist. Without a need to build branches, she said, these thrifts can focus their spending on training and education, as well as on product development.
Taking a different tack, New York-based MetLife bought Grand Bank of Kingston, N.J., in February 2001 and renamed it MetLife Bank. The company has said it was looking to sell banking products to beneficiaries of its life insurance policies and to the employees of its commercial clients.
However, a company spokeswoman said the bank was not ready to talk now about its plans for 2002.
Though most major insurance companies have thrift charters, only a few have launched full-service banking operations. However, State Farm's Mr. Ommen said he would not be surprised to see more insurer-owned thrifts getting off the ground in 2002.
Ms. Effron said that some of these efforts might be delayed into the second or third quarters because of the uncertainty surrounding costs to insurers from the Sept. 11 attacks.
However, she predicted, as insurer-owned banks and thrifts develop in the next couple of years, consumers will start to see a really seamless integration among the various kinds of financial services. But "it's a long-term process," she said.
