Safeco has added term life insurance to its list of offerings through financial institutions, two years after reentering the bank market with fixed annuities.
At the time, it said it wanted to be a multiline player in the channel, and it is slowly moving in that direction. Late last year, the big Seattle insurer began to add bank distributors of its mutual funds, and it also has a very small variable annuity sales volume among banks.
"We've said all along that we wanted to deliver multiple products to banks," said Mike Korthaus, the president of Safeco Financial Institutions Distribution, a division of Safeco Life and Investments, both of which are also based in Seattle. "We have over 200 banks distributing our products, primarily annuities. About 20 of them are offering our mutual funds, and that's going to grow."
But it is too early to see results, Mr. Korthaus said. The company had a "negligible" amount of mutual fund sales through banks last year and had close to no life insurance sales in the channel. Safeco had just more than $1 billion of fixed annuity sales through banks last year. Life insurance and mutual fund sales will grow, Mr. Korthaus predicted.
Last month, the insurer started its Safeco Now For Life term life insurance policy through what Mr. Korthaus said is one of the 50 largest banks in the United States. He refused to name it. The company also has term life distribution agreements with about 25 smaller banks. By Sept. 30, two of the 10 largest banks in the country will offer the term life product, he said.
"Banks sell to the mass market, and we want to reach the mass market with this product," Mr. Korthaus said. "This year we expect we'll sell 15,000 to 20,000 policies through banks. We're just beginning, but I believe we'll hit that number."
Consultants, however, wonder whether it is worth selling term life through banks. Like auto insurance, it is a product that only becomes noticeably profitable if sold in mass quantities.
Banks sold more than 50,000 term policies last year, producing $35 million of new premium, according to Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks product sales through banks. The $35 million of term life premium was about 5% of all bank life insurance premium. But the 50,000 term policies sold were more than for any other type of life insurance.
Some insurers have made a very small dent in the bank channel with term life insurance, according to the Kehrer firm. For instance, American International Group Inc. had $10.7 million of total premium last year, and Great West Life had $10.5 million. CGU Life, CUNA Mutual, and CNA also have established themselves in banks with term life.
Scott A. Robinson, a senior insurance analyst at Moody's Investors Service in New York, said the term life insurance market is highly competitive.
"It's a commodity-based product, and I think people are sophisticated enough that with a product like term life, they'll shop around," Mr. Robinson said. "With variable life and other life insurance products, companies can differentiate themselves with bells and whistles. But with term, it's basically price and the financial strength of the company."
He added that term life insurance is readily available in most channels.
"Go on the Internet; you'll get a quote very easily," Mr. Robinson said. "But, sure, banks can sell some of it as well. But you have to have scale to make money."
Michael J. Barry, the managing director of insurance at the Fitch Inc. ratings agency in New York, said, however, that term life insurance could work well in the bank channel.
"People make money on term life insurance, and that's why they sell it," Mr. Barry said. "At the end of the day, the bank channel is just another viable option to sell the product. All of these channels can be good sources.
"It's the only life insurance product that's sold on the Internet. It sells, period."
And Mark Puccia, the managing director of insurance ratings at the Standard & Poor's ratings agency in New York, said, "It's a simple enough product, and if you get the branch managers to really focus on it, I think it makes a lot of sense. Some banks are having some success, and I think it makes perfect sense for them to sell term life insurance. It's a simple product."
Overall, Safeco has $4.4 billion of life insurance in force.
Meanwhile, its mutual funds have $4 billion of assets under management. The company had $918 million of gross mutual fund sales last year, though almost none of this came through banks.
Kevin Rowell, the president of Safeco's mutual fund group, said this year that it has selected three portfolios to emphasize to its bank partners - the Safeco Equity Fund, Safeco Small Company Growth Fund, and Safeco Immediate Term Treasury Fund. One focuses on growth, one on value, and the third mixes both, Mr. Rowell said in a January interview.
For more conservative investors in California, it has offered the Safeco California Tax-Free Income Fund, a municipal bond fund. Also available in several states is the Safeco Municipal Bond Fund.
"That's attractive now because of the overall market," Mr. Korthaus said, adding that the bank focus for Safeco's mutual fund business remains the three portfolios named above - equity, growth, and Treasury.
