As banks cut back on annuity providers and the products become more commoditized, insurers are grasping for ways to position themselves as partners, not just vendors.
Some have dedicated wholesalers to the bank channel. Some create proprietary annuities with their bank clients. Others are providing sales and training programs. Still others offer an "agency-in-a-box" setup for all of a bank's insurance sales - and investment sales too.
"Almost anyone can manufacture an annuity," said Tim Waterworth, vice president of John Hancock Financial Institutions Group in Boston, which manages the insurer's sales through banks. "If you come up with something unique, it's going to get duplicated anyway. The product isn't usually enough."
Matthew Coyle, director of insurance ratings at Standard & Poor's in New York, is a bigger fan of product creativity. Banks don't need "15 insurers offering the same thing," he said. "Being innovative with product is important - even if someone else copies it."
But products are not everything, he said. "As the list of providers gets smaller at each bank, smaller, unestablished insurers are going to be at a disadvantage. Banks will turn to more established brand names."
Allstate Corp. of Northbrook, Ill., has such a name - but not as a provider for banks. "We have to demonstrate to banks where we can strengthen our worth," said Rob Shore, the director of its bank distribution division, Glenbrook Life and Annuity Co. "When we talk to prospects, as well as to existing partners, it's not necessarily about products. It's about what else do we have, and what else we can do for them."
Setting up proprietary annuity products has been the strategy of choice for many insurers, said bank-insurance consultant Kenneth Kehrer of Princeton, N.J. With proprietary variable annuities, a bank's funds are wrapped into the product. With fixed annuities, the bank manages the annuity assets.
Another insurer that has used the proprietary strategy successfully is Nationwide Financial Services Inc. of Columbus, Ohio. Proprietary fund products make up about 30% of its bank sales of variable annuities, said Matt Riebel, president of Nationwide Financial Distributors Agency Inc., which distributes its annuities through banks.
Mr. Riebel acknowledges, however, that even proprietary annuities have become commoditized. Almost everyone can create proprietary annuities with a bank, he said, "so it's not as much of an advantage as it once was."
Nationwide also has a program that helps sales managers hire and retain the right platform employees. "Banks, like everyone else in retail, have a tough time finding and keeping talented people," Mr. Riebel said. "We help them identify the right person and help them hold on to them. We'll talk to banks about what sort of incentive programs they set up."
Philadelphia-based Lincoln National Corp. is a relative newcomer to the bank channel. Phil Holstein, who runs the unit that distributes its annuities only through banks, said that even though proprietary products are common, insurers cannot afford not to offer them.
"We were late to the game" and have not done much with proprietary annuities, he said, "but we're doing it now."
Mr. Holstein said selling to banks requires experienced salespeople who deal only with banks. "We have 25 wholesalers dedicated to banks," he said. "Banks are different. We have to understand what drives them and what pressures they face. Only a bank-dedicated wholesaler is going to know."
Hancock's Mr. Waterworth said his company has some proprietary fund agreements, but he would like more. To sell through any of the top 100 banks, putting the bank's own funds into the annuity is "an absolute must," he said.
Though Allstate also has several proprietary fund agreements, its Glenbrook subsidiary is using a training program to make friends with banks.
The program is designed to help bank-based financial consultants find out what kind of financial help and products their customers need.
The program, launched in March, is called Hatrack because of the many hats platform reps have to wear when working with clients, Mr. Shore said.
Insurers "have to develop programs that help our bank partners drive up sales," Mr. Shore said.
He wants Allstate to be the top annuity provider in every bank through which it sells. "If we are there already, a program like this will help us stay there," he said. "If we aren't, we're hopeful it'll help us move up."
John Hancock is taking a more comprehensive approach toward making itself indispensable to bank partners. Late last month it rolled out Platform Plus, a total sales, marketing and support service for bank insurance and investment sales. The first and so far only customer is Compass Bancshares of Birmingham, Ala.
The service was developed with Essex Corp., the veteran third-party marketing organization Hancock bought in 1999. It not only gives Compass' reps access to all of Hancock's life insurance, annuity, and mutual fund products, but also provides sales materials and product training to Compass' reps.
All of these strategies are increasingly necessary for insurers that want to be sure they are getting the most from their bank partners, analysts said.
Michael White, president of the Michael White Associates consulting firm in Radnor, Pa., said bank platform employees need a better understanding of the insurance products they sell.
"Helping a bank train its sales staff is a great way to up your production and improve your relationship with the bank," he said.