In the spirit of Deep Blue's triumph over chess player Gary Kasparov, an Akron, OH-based bank insurance agency is bypassing traditional agency and direct mail solutions in favor of a computer counterpart-Virtual Agent- that automates the personalized marketing, sales and distribution of insurance products.

At this time last year, newly hired Felice Larmer was faced with reviving $5.3 billion-asset FirstMerit Corp.'s dormant insurance agency. "I had all these proposals on my desk from lots of people who were willing to take my deposit base and mass-mail life insurance solicitations. ...And I get a small piece of the commission," says Larmer, president of FirstMerit Insurance Agency Inc. "I didn't really want to do that. Direct mail just doesn't work that well anymore."

At an industry convention that year, Larmer met Richard Libman, president of California-based ICA Technologies. After four years of R&D, ICA was launching its Newco System at the show, featuring two patented technologies designed to "revolutionize direct marketing."

The Virtual Agent technology-really a series of parallel technologies that incorporate database mining-is based on a relatively simple concept. With bank-supplied customer data, the Virtual Agent uses individual account demographics and computer modeling to print a personalized insurance offering for each customer on a bank statement. ICA has patented both the Virtual Agent and its "piggyback marketing" that enables customers to reply by mail, fax or telephone to a telemarketing center that takes a request to either buy the product, get more information or get another quote. "This was a personalized solicitation, rather than being based on (general demographics)," Larmer says.

Each night the information from the calls made to the telemarketing center is downloaded directly to Newco computers. The next day a personalized response is mailed to the potential customer, either an application or the information requested. Libman stresses that the system can send personalized pitches and accept responses from an unlimited number of bank customers. "To do a million people in telemarketing would take you a year with 500 telemarketers," Libman says. "We can do a million people in a week."

The other advantage to the Newco System, Larmer says, is the price. Licensing fees for the Newco technology cost about $35,000 a year, Libman says, plus the company gets "a small royalty" share of each dollar the system makes for the bank. But Libman claims that "on a typical life insurance sale, our pro forma profit and loss for a bank is, after all costs, they make 75 cents on each dollar of commission income."

FirstMerit's first application of the system was an individualized pitch to sell life insurance to all of its DDA holders. And though FirstMerit prides itself on being a high-touch institution, marketing life insurance that way just isn't profitable, Larmer says. "There's an under- served market that, using this technology, we could penetrate. And you've got to do it on a high-volume, low-cost basis," she says.

After that, the bank rolled out an offering to older customers and then a term life offering. Future promotions include a guaranteed issue offering and a test of a long-term care product.

The piggyback solicitations garnered more than 1,400 responses and 400 applications, which were handled by Larmer's staff of one full-time agent. In an ICA comparison of two bank insurance marketing programs, one a national bank and the other a super-regional, Libman claims that the Newco response and sales rate was more than 600 percent greater than the standard direct marketing program. Larmer says that she's not positive that these numbers are an equitable comparison, but added, "I believe that it is true that, by using a piggyback, we are generating about five times more responses and five times greater sales."

FirstMerit has significant plans for using the Newco technology over the next 14 months. Says Larmer,"It's a wonderful way for us to reach a market that by its very responses is telling us they want us to do business this way."


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.