When it comes to the question of where banks can make money in selling insurance to small business, the consensus is that distribution is the key Let's hope so for the few pathfinders out there now, with no profitability statistics for inspiration. It can't be the margins, notoriously thin in the best of times, which the insurance industry has not seen for years. Don't expect financial reform to help, either. Insurance sales are regulated on a state-by-state basis, and that is not likely to change easily.

There is no question of potential customers, however. In 1995, small businesses made up over half the work force and 40 percent of the nation's gross national product, according to a recent BAI/McKinsey & Company, Inc. report, "Unlocking Winning Strategies to Serve Small Business." Traditionally, small companies (defined by the report as $10 million or less in annual revenue) stay with a particular financial institution for a long time and consolidate a significant portion of their business, which makes them apt to be more profitable than retail customers. Yet these days banks have to guard small businesses, as well as retail bank customers, from interloping innovators on the prowl.

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