Safeco Corp. is adding term life insurance to its bank channel lineup.
For Safeco, this is in addition to a relatively recent push in fixed annuities. The Seattle insurer started peddling fixed annuities in banks despite the fact the bank marketplace is considered crowded.
Safeco sold $270 million of annuities through banks in the first quarter and just under a half a billion dollars of fixed annuities at banks in the last six months. This was from an annuity sales base near zero a year earlier.
Now the company is turning to term life insurance, a product of which it sold $14 million to $15 million of premiums in the last year on 25,000 policies through independent agents, according to Jennifer Davies, the vice president of individual life at Safeco Life and Investments Co. The product will be sold through the same platform agents in banks who sell Safeco's annuities, she said, and the same 25 wholesalers who work with banks on selling Safeco annuities will support the term product.
"They've proven they can sell annuities, and this is a simple life policy, it's not complex," Ms. Davies said. "There are about five things that have to be filled out over our intranet site, and that is it. It takes less than 15 minutes to get a $250,000 life policy. The customer leaves the bank with a temporary policy."
After the temporary policy is issued, a Safeco-hired paramedic contacts the customer to set up an appointment, during which the customer typically is tested for specific illnesses.
A $200,000, 10-year, level-term Safeco policy for a 45-year-old would cost $237 per year for a man and $215 per year for a woman at the company's preferred best rates (effective next Monday). These rates are fully guaranteed for the entire 10 years.
"The product is amazingly cheap, and the visit from the medic is quick," Ms. Davies said.
However, Bob Wick of the Cramer, Wick & Associates consulting firm in Davidson, N.C., said some banks would not be comfortable letting an outside person contact their customers.
"You've farmed out the completion of the sale to an outside source that might not make the bank customer comfortable," Mr. Wick said.
But Kenneth Kehrer, the president of the Kenneth Kehrer Associates consulting firm in Princeton, N.J., said he thought the concern over outsourcing was exaggerated.
"It's not like you're buying a car, where the questions about health are not relevant," Mr. Kehrer said. "But I also don't think it's so hard for the person at a bank to ask these questions either. That's the barrier that surprises me, but clearly people at banks and insurance companies feel like it's a barrier because it's outsourced."
At Safeco, the product is still in its launching phase for banks. The company is in talks with many of the same banks that sell its annuities.
"There's nothing live now," Ms. Davies said.
Mr. Kehrer said Safeco could succeed in building its term life business because "when I did research with two big banks, the insurance needs of 90% of their customers could be met with a policy of $100,000 or less." He added, however, that Safeco is not alone in trying to tap this market. CGU Life, Great-West, GE, and CNA are all also peddling term life policies through banks.
"And there are a few banks that have created successful programs," he added, mentioning Huntington, HSBC, U.S. Bank and Dime, now part of Washington Mutual, as institutions with term life sales.
"Last year, banks sold $25 million of first-year term premium," Mr. Kehrer said. Of course that's minuscule compared to annuity sales volume through banks. For instance, 29 providers sold more fixed annuities each through banks in the first quarter than the entire industry sold of term life insurance last year.
Mr. Wick said he is not so sure term life insurance will be a big hit at banks. The only reason banks have sold life insurance to high-net-worth customers, he said, is that it creates meaningful revenue.
"I suspect that the banks will sell a little more of it as a service to their customers, but in the end will the financial results be measurable? I think not," Mr. Wick said. "Term life has small margins. It's almost a defensive measure for banks. One bank sells it and then another bank sells it. But I don't see a whole lot of emotion behind it."
The small commissions and margins are a concern, Mr. Kehrer said.
"If the premium is in the $300 to $500 range, there is not much money for the bank to make, hence not much money for the banker to make," Mr. Kehrer said. "The average commission for a term-life policy is between $10 and $20. On the average fixed annuity sale of $20,000, the commission is $100. As you can see, there's a difference."
But none of this is necessarily the point, said Mike Grier, the president of Huntington Insurance Services, a subsidiary of Columbus, Ohio-based Huntington Bancshares Inc. Huntington offers Great-West's simple-issue term life insurance, and it sold 12,000 policies last year, Mr. Grier said. The average policy costs $240, he said.
"One, this is an area that we add value to the customer, and two, it creates an awareness that we're in the insurance business," Mr. Grier said. "So, sure, the premiums are not large, but the key is, the customers know we're in the insurance business in a full-service way, and that opens up the opportunity to offer other insurance products as well."
Huntington offers the term insurance through mailings, call centers, investment reps, licensed platform representatives, and insurance executives.
"It's the same price, no matter where they get it," Mr. Grier said. "Wherever the customer touches us, we offer it."
