Banks that sell commercial lines property/casualty insurance and employee benefits are using their relationships with business clients as an entry point to help gain the volume in personal lines products that is needed to make money.
This "worksite marketing" opens access to pools of customers and can be a cost-effective way of acquiring them - as banking and thrift companies from FleetBoston Financial Corp. to People's Bank are discovering.
Personal lines insurance has low margins and is a difficult business for banks to make money in unless they can generate huge volume, experts say.
Worksite marketing is "the next bastion of opportunity in the banking arena," said Valerie Jordan, president of the bank-insurance consulting firm Jordan & Jordan Associates in Belchertown, Mass.
Banking companies can capitalize on banking or employee benefits relationships with clients, signing them up to let the bank offer their employees additional insurance products - like auto, homeowners, life, or prepaid legal - over the Internet, through agent visits, or in marketing materials with paychecks.
Employers pay nothing for these benefits, and employees often get a discount because they buy insurance as part of a group and can have their premiums deducted directly from their paychecks.
By providing these services banks not only increase the pool of customers buying personal lines products from them, Ms. Jordan said, but also benefit their corporate clients at no cost to the client.
"It makes the corporate client look very much like a hero to the employee," Ms. Jordan said, because the worker can get discounts on common insurance products through these marketing programs.
Sue Hutchins, a vice president at R.C. Knox & Co. in Hartford, Conn., who manages the personal and sponsored insurance division, said worksite marketing is a less expensive way to sell property/casualty insurance than on the platform because each corporate client that signs up brings a large pool of potential customers.
R.C. Knox is the commercial and personal lines property/casualty and employee benefits agency owned by $13.7 billion-asset People's Bank of Bridgeport, Conn.
"The marketing costs tend to be lower," Ms. Hutchins said, in part because the employees pass along information about insurance products by word of mouth. Insurers often pay higher commissions on group plans, she said, so savings can be passed along to the employees.
For the bank, Ms. Jordan said, "here's a way to complement what you do on your platform, by giving a similar core group of products to your corporate development officer."
Only a subset of the bank's existing customers will come into a branch to buy insurance, she said, but a worksite marketing program opens up the product line to a whole new group of prospects.
Worksite marketing can also fit seamlessly with other banking products.
For example, FleetBoston owns a payroll services company called InterPay Inc. Norman J. Deluca, the managing director of small-business services at Fleet, said the company's insurance division is exploring ways to use InterPay for worksite marketing of insurance through inserts in pay envelopes and the automatic deduction capability.
Banks are "constantly looking for new ways to increase revenue and tap into new areas of distribution," said Rudy Nadillo, chief executive officer of Stamford, Conn.-based vSimplify. Selling to the employees of existing clients is an inexpensive way to do that, he said.
Mr. Nadillo's company helps banks use the Internet to cross-sell their insurance product lines as well as additional products to clients' employees. It sets up internal Web sites for the clients with employee benefits information for their employees, Mr. Nadillo explained.
A bank or another financial services provider "sponsors" the site, branding it and adding links to sell insurance products and banking services, he said.
When employees of the client company visit the site, for example, to change their benefits plans, they are solicited to buy other products, Mr. Nadillo said. These can be the ones sold by the bank's own insurance agency or products from suppliers with which vSimplify has agreements, he said, including auto, homeowners, life, prepaid legal, and other coverages.
He said that banks can charge corporate clients extra for the internal Web sites but that "enlightened" banking companies generally provide the sites as part of a client's employee benefits package.
Mr. Nadillo says that his company's research shows that the proportion of a company's employees buying additional products on the intranet sites varies widely, from 15% to 55%.
vSimplify's clients include Webster Financial Corp. of Waterbury, Conn., Mr. Nadillo said. He said he has other bank clients but declined to name them. "Most of the banks, to maintain their competitive edge, have a big insurance component," he said. "They can put their insurance products and all their banking products on the site. It's a really nice package."
"It's a new distribution channel for them," Mr. Nadillo said. Banks "have hundreds and thousands of clients that they sell at the commercial level, and here's a way for them to tap into the employee database."
Ms. Hutchins of the People's insurance agency said that most of her referrals come from its commercial lines or employee benefits insurance agents but that she has had some referrals in the past year from commercial bankers.
Knox has worksite marketing agreements with about 30 companies, ranging from 25 employees to several thousand.
Most employers let workers opt to have premiums deducted from their paychecks, Ms. Hutchins said. Automatic deductions on a regular basis make paying for auto insurance easier for the worker, she said.
If an employee leaves the client company, he or she does not lose the insurance, Ms. Hutchins said, though the person does lose access to the group discount. In most cases, she said, when the policy comes up for renewal, Knox will offer new quotes to the ex-employee - which can mean the bank-owned agency retains the personal lines client long after the job change.
Rates are rising for commercial lines insurance, including employee benefits, observers noted. Offering additional services to employers can help keep the client happy as prices go up, Ms. Jordan said.
"We found that a lot of employers have just gone through their benefit analysis and have to give the bad news to the employees that their health-care costs are going up," Ms. Hutchins said. Offering discounted property/casualty insurance through a worksite marketing program is a way to give workers savings that can offset some of the higher benefits costs, she said.
A tough marketplace for insurance is actually a good time for an insurance provider to offer a worksite marketing program, Ms. Hutchins said.
"When the market is tight, benefits is kind of a top issue, and that's the best time for us," Ms. Hutchins said. As insurance rates go up and employers cut the benefits they will pay for or raise deductibles, discounts on products like auto insurance "can help soften the blow," she said.
