In the latest foray by insurers onto bank turf, a group of Tennessee agents plans to compete for loans and deposits with a newly chartered institution in Nashville.

Insurors Bank of Tennessee has been chartered by Insurers of Tennessee, the state chapter of the Alexandria, Va.-based Independent Insurance Agents of America, the industry's largest agent organization. The group projected that the bank will open for business in the fourth quarter.

The bank comes as insurers and their trade groups move to establish a credible presence in banking and to broaden the menu of financial products they can offer.

"The independent agent typically has a better relationship with his commercial customer than the banker does, particularly with all the upheaval in the banking industry," such as mergers and acquisitions, said Michael Qualls, the bank's president.

Insurors Bank is a joint venture between Inscorp, a company formed by the agents, and Cumberland Bancorp, a $550 million-asset holding company in Nashville.

The new bank got its state charter in early July and is awaiting approval from the Federal Deposit Insurance Corp., Mr. Qualls said. The bank has already gotten approval from the FDIC's regional office in Memphis, and Mr. Qualls said he expects final approval in the next three weeks.

The bank's goal is to provide a place for its 475 member agents to handle their own banking needs, as well as commercial and personal products for the agents and their clients, he said. "While we will be more commercially oriented, we will provide consumer products as well."

Cumberland, which operates four Tennessee banks - BankTennessee, Bank of Dyer, The Community Bank, and Cumberland Bank - and Inscorp each contributed $2.25 million of capital to start Insurors Bank, according to documents filed with the Securities and Exchange Commission.

Cumberland will own 50% of the voting stock and will name three of the bank's 14 directors. Inscorp will name the other directors and sell the remaining shares, primarily to Tennessee insurance agents, the documents said.

As part of the agreement, Cumberland is to provide investment, accounting, auditing, and human resources management and loan-review services to Insurors Bank on a fee-for-service basis.

The agents feel their customers will use the new bank, which is training agents to market the products, Mr. Qualls said.

Tennessee bankers said they see the new bank as another example of the convergence of banking and insurance.

Brad Barrett, executive vice president of the Tennessee Bankers Association in Nashville, said his group has "long been a proponent of bankers getting into the insurance business, and I'd say we'd be a bit hypocritical if we didn't think it could work the other way as well."

The new bank has a good partner in Cumberland, he said. "There are some very experienced Tennessee bankers involved in the formation of the Insurors Bank of Tennessee, in much the same way we have some very experienced insurance agents that are now employed by Tennessee banks.

"This is just another example of the way financial services are changing and evolving," Mr. Barrett said.

Insurance agents have a widening array of options for providing banking services to their customers. The Independent Insurance Agents of America is awaiting a federal thrift charter for InsureBanc, which would eventually offer banking services to the group's 300,000 members.

Agent trade associations are not the only ones starting banks. The National Association of Mutual Insurers opened Assurance Partners Bank in June to offer banking products through the agents that sell its members' policies.

State Farm Insurance Cos. of Bloomington, Ill., obtained a thrift charter so it can market banking products through agents, and Grange Mutual Casualty Co. of Columbus, Ohio, has opened a full-service savings bank for the same purpose. Numerous other insurance companies have applied for thrift charters.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.