Sales of single-premium life insurance products through banks bolstered sales of all life insurance products in the channel in 2002.
Banks sold $484 million of single-premium products last year, up 48%, according to statistics compiled by Kenneth Kehrer Associates. About 75% of the single-premium products sold through banks were universal life, with whole life representing more than a fifth of single-premium sales. Almost all the single-premium sales were of fixed products.
"It's not surprising that banks have had particular success with single-premium life insurance, because it's a lot like an annuity. It's an asset-transfer product," said Kenneth Kehrer, the Princeton, N.J.-based consulting firm's president.
Bank-sold premium over all, including single-premium and recurring-premium life products, rose 42%, to $643 million, in 2002. Variable life and variable universal life accounted for 64% of first-year recurring-premium.
Banks sold $207 million of weighted premium in 2002, up 34%. That is after weighted premium dropped 8% in 2001. Weighted premium is computed by taking 100% of all recurring premium and adding 10% of all single-premium. Life insurance industry statistics generally discount single-premium products, because historically they have been much less profitable to insurance companies than recurring-premium products.
But that distinction should not trouble banks too much, Mr. Kehrer said.
"From the bank's point of view, they're selling more life insurance" no matter what type it is, he said.
One company making inroads is Allstate Corp., of Northbrook, Ill.
Sales of Allstate's fixed single-premium whole life product rose more than 50% last year. DeeAnne Asplin, a senior vice president at Allstate Distributors LLC, which sells annuities and life insurance through banks, said the company's Generation Advantage product was designed specifically for the bank channel.
"It's an asset-transfer product, and the payout is more along the lines of an annuity, which banks obviously sell a lot of," Ms. Asplin said.
Others, like Nationwide Financial Services Inc. in Columbus, Ohio, have gone a different route and pushed into the bank channel with recurring-premium products. Nationwide primarily sells variable universal life insurance through banks but plans in the coming months to launch a fixed universal life product through banks.
"We've always believed variable life is a tremendous product for long-term growth through the equities market," said Matt Riebel, the president of Financial Institution Distributors Agency Inc., the Nationwide division that sells and markets annuities and life insurance through banks. "The bank industry needs both variable and the traditional fixed [life insurance] products to satisfy the diverse needs of its clients."
Nationwide was 2002's top seller of life insurance through banks by weighted premium, with $38.1 million, according to Kehrer Associates.
Hartford Financial Services Group has also made a splash with recurring-premium products. Most of the Connecticut company's sales are from variable universal life insurance, while a small amount of bank-sold premium comes from universal life, a fixed product.
"Variable universal life represents the best solution for most permanent life insurance needs that bank clients have," said John Gies, director of financial institutions for the Hartford's individual life division. The Hartford targets high-net-worth clients for life insurance in the bank channel.
But since some clients are more risk-averse, "The Hartford has also introduced fixed-rate universal life policies to the bank market to meet the needs of those clients who want guarantees," Mr. Gies added.
Hartford and Nationwide also happen to be two of the largest annuity providers through banks. Hartford has been the top seller of variable annuities through banks for more than a decade. Both companies said it is imperative that their life insurance sales keep rising.
Of course, banks are much bigger sellers of annuities, a product some of them have peddled since the late 1980s. They sold $49 billion of annuities last year, according to Kehrer Associates.
Not everyone is bullish on banks becoming a big part of the life insurance industry. In 2002, of all life insurance sales in the United States, only 1.8% came through the bank channel. That was up only slightly, from 1.5% two years ago. Arthur M. Fliegelman, a senior credit officer for Moody's Investors Service, said that percentage probably will stay about the same.
"There's no sign of that changing anytime soon," Mr. Fliegelman said. Banks have "trained their customers to use ATMs, direct deposit, and the Internet, and have this attitude of 'don't bother me,' and then they want to sell life insurance? Some banks might get it right, but I don't know."
Mr. Riebel disagreed.
"Numerous studies have shown that middle-income individuals are underinsured, and most of them are the traditional bank customer," he said. "Because that customer base has such a great need, banks have a real opportunity to deliver a life insurance solution."
