Though many banks are eager to buy insurance agencies, they are still searching for effective ways to blend insurance into their product mix.

At Summit Bancorp of Princeton, N.J., the search led it close to home: It has decided to move one of its insurance agencies next door to a Summit bank branch in Bayonne in an effort to improve communication between agents and bankers and subsequent cross-selling.

The relocated agency is the former Patgo Insurance Agencies and is now part of Summit Insurance Advisors, which opened the Bayonne office this week.

"Housing people together is a key factor in team selling," said Jim O'Connor, senior executive vice president for new business at Summit Insurance Advisors of Cranford, N.J. "You have people with different areas of specialization communicating with each other."

Communication is just one issue that banks need to face when trying to get agents and bank employees on the same page, consultants said.

"The bank people are going to have to be slightly more sales-oriented, and the agency people are going to have to realize that when a customer walks into a branch, they aren't expecting a sales-oriented attitude," said James Overholt, senior consultant and manager of financial services programs at Milliman & Robertson Inc. in Chicago.

Also, bank employees and insurance agents do not always push the same products, said Ken Kehrer, president of Kenneth Kehrer Associates in Princeton.

"Brokers in a bank are generally more interested in selling mutual funds than life insurance," Mr. Kehrer said, adding that many brokers are reluctant to give others a crack at their clients.

"I call it customer hoarding," Mr. Kehrer said. "The broker wants the relationship to himself and doesn't want to share the customer with the person who sells life insurance, which means the customer ends up with less life insurance than they should have."

These issues "are very real and have to be carefully managed," Mr. Overholt said. "There's a lot of room for everyone to make mistakes."

The one-roof idea is smart, consultants say.

"There is nothing like knowing each other and getting organizations closer together to help along integration," said Carmen Effron, president of C.F. Effron Co., a consulting firm in Westport, Conn. "Also, proximity is conducive to building trust, so this is a great move in working out some of those cultural issues."

That's exactly what is intended at Summit, Mr. O'Connor said. "You'll realize that cultural differences aren't as bad when people eat together, work together, and get to know each other," he said.

Ms. Effron said another good idea is for bank managers to set clear rules.

"Articulate that if a referral is made, there will be compensation," she said, adding that compensating the broker who refers a client to an insurance agent will boost referrals.

Mr. Kehrer said, "The bottom line is, there is real value in getting more bank customers to buy at the agency and agency customers to buy at the bank."

That's the main reason banks will buy more insurance agencies this year than in the last three combined, John Wepler, vice president of merger and acquisition services at Concord, Ohio-based Marsh Berry, said in a June interview.

Marsh Berry says that fewer than 10 of the 100 largest U.S. insurance agencies are owned by banks, though it predicts this share will reach 40 by yearend 2001.

"For most banks," Mr. Wepler said, "the thinking has shifted from 'if we acquire an agency' to 'when we close our first insurance deal.'"

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