Wells Fargo & Co. has scrapped an effort to sell life insurance to prospects outside its customer base.
Wells, one of the banking industry's most aggressive marketers of investment products, disbanded a two-year-old program under which it tried to sell term, whole-life, and long-term-care policies by telephone. The bank had bought lists of prospects, then sent them marketing materials that included a toll-free telephone number to call.
San Francisco-based Wells will continue to sell insurance via mail and phone to its own customers, said Michael Patriarca, president of Wells Fargo Insurance Services. But it is planning to simplify its product menu.
"It's tough sledding right now, but it will come," Mr. Patriarca said.
Wells-which launched its direct-mail insurance effort in 1992-is one of the first banks to acknowledge a setback publicly. Its retreat comes as many banks are developing marketing programs that involve sending insurance solicitations through the mail to targeted audiences.
Now, many of these banks are likely to revisit their strategies because of Wells' lofty stature in the industry.
"There are those bankers who will point to Wells and say, 'Even they can't make it work,' but they shouldn't read that much into this," said David Kaytes, a managing vice president at First Manhattan Consulting Group, New York. He called Wells' attempt to sell insurance to noncustomers an "experiment" that would not deter it from trying other strategies.
"It's an example of the learning process banks are going through," he said.
Wells halted its effort to sell policies to consumers outside its customer base on Jan. 6, a spokeswoman for the $108.8 billion-asset banking company said.
The move affected 19 salespeople. Mr. Patriarca said most of them have found posts in other areas of the bank.
A former regional director for the Office of Thrift Supervision and deputy comptroller in the Office of the Comptroller of the Currency, Mr. Patriarca called Wells' effort to go outside its customer base "a complex and interactive process that wasn't conducive to a direct mail telephone sale."
While the program generated a hefty volume of responses, it was not successful in converting calls to sales, he added.
Mr. Patriarca emphasized that he still believes selling insurance via mail and telephone is cost-effective. Other banks are experimenting with selling insurance through platform representatives or insurance agents, but Mr. Patriarca said the "face-to-face" approach takes too much time.
The program at Wells involved buying lists of consumers, such as those who had just bought homes or had children, then marketing to them products underwritten by and All American Life Insurance Co., Chicago, and First Colony Life Insurance Co., Lynchburg, Va.
Wells offered potential customers a toll-free number to call, or a card that they could fill out, providing a phone number and time when one of the bank's agents could follow up.
After talking to a prospect, the agent was to set up an appointment for the customer to get a medical examination. Wells Fargo worked with a "paramedical" firm, which sent a representative to do the exam in customers' homes.
Sales became more cumbersome and slower than the bank had anticipated, said Mr. Patriarca, and customers were frustrated.
Mr. Patriarca said the company is going to sell to its own customers products that have less complicated underwriting standards. He acknowledged that such policies carry reduced death benefits but explained that they can be sold more quickly.
Executives at one of Wells' competitors said they weren't surprised the bank was forced to rein in its aggressive program. Wells was mailing hundreds of thousands of letters a month, sometimes as many as one million.
"I knew they were spending a lot of money, and they couldn't do it forever," said the head of another California bank insurance program.
Such programs generally cost about 50 cents per letter, including 5 cents for each name the bank buys.
Wells continues to employ 46 people who market to bank customers.