As more insurance agencies run to the arms of commercial bankers who are panting at the thought of insurance revenue, it is worth considering whether one plus one equals more than two, or a negative number.

The two financial distribution channels are wrestling with the same problems. Their industries are consolidating. Nontraditional competitors are offering their bread-and-butter products at lower prices. Margins on their lead commercial products have been flat or declining, and their suppliers are going direct (particularly through the Web).

The companies also are moving headlong into dozens of new products and services, and their sales people have been primarily product-focused though claiming to be client-focused.

The potential is clear. The problem is equally clear: Commercial relationship managers and their insurance colleagues have been slow to migrate from a "product" culture to a "financial consultant" culture. They have also been slow to migrate from a "lone wolf" to a "multidisciplinary team" approach.

Sales channels and brands are proliferating, and pricing pressure is stiff. Bankers and independent agents who have developed solid books of business are reluctant to change their methods.

If commercial bankers and insurance agents hope to retain their most profitable clients, they must develop a clear sales blueprint that defines the value they want to sell and the methods through which they will sell it.

The blueprint should define a comprehensive approach to assessing clients' business goals and risks and recommending combinations of insurance, risk management, loss management, investments, financing vehicles, and other services to help them reach their business and personal financial goals. Virtually no commercial bank has such a blueprint.

Because bankers frequently take the view that insurance salespeople are "too product-focused" and "too aggressive," bank sales managers and the colleagues in their captive insurance agencies must encourage collaboration by developing personal relationships and defining the expectations of both insurance specialists and relationship managers.

These expectations should define marketing strategies, roles in the sales process, internal service agreements for referral follow-up, sales activity levels, and revenue production to penetrate business on both sides. Bank and agency managers must define how insurance-focused sales will affect employees' recognition and compensation. Successes that exhibit integration across product lines should be celebrated quickly and loudly.

Though slow to admit it, commercial bankers trained as lenders still think in terms of products and transactions, even when asked to sell broadened product offerings. To offer clients the full advantages of broader lines, relationship managers and their insurance colleagues must:

  • Learn how to use credit, investment, and insurance products in alternative combinations.
  • Develop the business acumen to anticipate customers' issues and make relevant recommendations.
  • Probe their clients' business strategies and challenges while using value-based sales processes.

There is still much work to do on commercial banker probing. Commercial bankers typically ask five to seven "fact-gathering" questions, then suggest a product or offer the assurance that "we can take care of that for you." Bankers (and insurance specialists) must ask more and better questions that explore clients' goals, strategies, the effects of management decisions, and relationships between different elements of a business.They must also become knowledgeable about their clients' industries and the economic and competitive forces that affect them. Without this information, the sellers will be product-popping for another decade.
Commercial banking plans typically are triggered by loan and deposit production and supported by modest incentives for referring leads for "ancillary products." This terminology underscores the low perceived importance of these products.

As loan margins fall and the commitment to sell integrated solutions rises, incentive plans change from production goals ($X of loans, $Y of deposits) to goals that account for all sources of revenue or gross margin on an apples-to-apples basis.

To encourage insurance sales, the plans should make agents and bankers somewhat dependent on each other, for example, to augment the revenue stream from a book of clients. If this is not done, bankers will migrate toward clients that can help them meet loan and deposit goals, and the independent agents will focus on short-term, commission-based business.

Banks have tremendous sales opportunities but have been falling short of their potential. To accelerate insurance revenues, bank and agency managers must:

  • Teach their salespeople to make comprehensive value-generating assessments of their clients.
  • Suggest solutions that integrate financing, operations, risk management, and investment services.
  • Establish joint accountabilities and agreements that encourage insurance specialists and relationship managers to work together effectively.

It is not too late for many banks to get it right, but only a serious commitment will do the job. If coupled with changes in operating procedures, selling insurance and other products can finally fulfill its promise.

Mr. Miller is president of Clarity Advantage, an Acton, Mass., sales management consulting firm.

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