Community Valley Bancorp opened a de novo insurance agency last week as its entry into the insurance business and a step toward both higher noninterest income and a one-stop financial shopping experience for its customers.
Russell Wittmeier, a senior vice president at the Butte Community Bank subsidiary of Community Valley Bancorp, said Butte had decided to open the business with the help of an agency outsourcer to "continue to solidify banking relationships with customers" and because so many customers approach their banks first for financial services products.
Community Valley Bancorp announced last Friday the opening of CVB Insurance Agency in Chico, Calif., which is also the banking company's headquarters city. Both $418 million-asset Butte Community and CVB Insurance are wholly owned subsidiaries of the parent Community Valley.
"Before we opened the agency, we were doing a lot of referrals for insurance," Mr. Wittmeier said, so the bank decided to open an agency to tap this noninterest income. "We were also looking to return a good profit to our" shareholders, he said.
"In the insurance business, you either buy it, build it, or rent it," said Mr. Wittmeier. Buying or building an agency would take longer to turn a profit, he said, so the bank worked with Financial Keyosk, the Carpentersville, Ill., outsourcing company, on a "rental" basis. Financial Keyosk takes care of the back-office work, and CVB Insurance focuses on the sales and service side of the business. Financial Keyosk's service center is in Colorado.
"We didn't buy because it would take five years to be profitable," he said.
His first-year goal for the agency is that it sell $1 million of premium and "ramp up from there," Mr. Wittmeier said.
"Insurance companies seem to have different [product] palettes that change from time to time," he said. "If Allstate or Farmer's decides not to offer homeowners insurance, customers have to do more legwork. We have many different products and services and numerous [insurer] appointments," he said. This makes the CVB agency a one-stop shopping experience and will help ensure its success, he said.
CVB Insurance will offer auto, health, commercial, and farm policies. Its initial focus will be on commercial products such as liability, workers compensation, group medical, crop insurance, and coverage for large housing developments.
"This is a whole new venture, a new avenue for the bank," Mr. Wittmeier said. "Many banks are in the insurance business, but their platforms are not integrated. This agency is operating in the banking structure, and that is what is unique."
Butte Community Bank began working with Financial Keyosk in October. The outsourcer offers life, health, property and casualty, disability, and employee benefits products to individuals and small businesses through banks and other partners.
The company works through credit unions and banks that include the former Union Planters Corp. in Memphis and MidAmerica Bank in Clarendon Hills, Ill.
Under the arrangement with Butte, Financial Keyosk is to supply technology, carrier access, and service centers to support insurance sales by agents the bank will hire. And Financial Keyosk promises to do so at a lower cost to the bank than building an agency from scratch.
John Dawson, the president and chief executive officer of Financial Keyosk, said it has 10 bank alliances and three credit union relationships. These customers are in 10 states, including New York, Illinois, Michigan, and California.
"Our model is to put insurance in banks," he said. "Until recently, banks had a couple of options - they could buy or build insurance agencies. We bring in a third option, outsourcing."
"We are licensed in 50 states and have technology that could place an agent anywhere," he said. "All they have to do is hire the agent."
Mr. Dawson said that his company does not target a specific size bank as customer. "No bank is too small," he said, but community banks' options are more limited by their size, so they are a particularly good fit for this type of alliance.
Frank Hill, a local insurance broker, is to lead CVB Insurance as a vice president and the agency's manager.
Its platform will feature more than 40 carriers, Mr. Wittmeier said, which will let the bank reach a broader base of customers.
