Banks have been selling insurance for 10 years, but that might come as a surprise to many of their customers.
A recent study by Arthur Andersen indicates banks see insurance as a large growth opportunity, but most of them are failing to act on it.
“In order to develop the broadest relationship with the customer and the highest chance of retaining them, banks realize they need to broaden their product mix,” says Bruce Heuton, a partner in the financial services industry group of Arthur Andersen. “It’s also cheaper to sell a new product to an existing customer rather than an existing product to a new customer.”
Banks were recently given regulatory approval to own the insurance companies themselves, but as with the policies themselves, few banks are taking advantage of this opportunity.
“Everyone is selling insurance already,” says Heuton. “They are selling as many products as they can, but the insurance pieces have been very separate and not well integrated in the banks’ product mix. It’s simply harder to sell a life insurance policy than to make a loan.”
Banks should be able to leverage their reputations to make inroads in the insurance business. Studies show that in the property, casualty and auto insurance business, people care about the reputation of the provider. Will the provider be there when needed?
“Banks have that credibility with customers,” says Heuton.
Life insurance is a bit different. Potential customers of life insurance are looking for trust and knowledge of the person’s future and how they live. In this case, someone, either an insurance agent working for the bank or possibly a loan officer, is needed to have a chance at a successful sale.
Despite the potential growth, banks simply aren’t acting on it. In the Andersen study, every bank that responded listed growing insurance as either its first or second priority. Yet not one bank stated that insurance revenue would exceed 10 percent of total revenue.
“It’s a matter of priority and focus,” says Heuton. “Many of the respondents were the insurance executives of the banks. They were largely frustrated about not getting enough mindshare from the senior executives.
“Is the reason for slow growth that they aren’t offering products? The answer is no. They are generally offering most insurance products, they just aren’t offering it well. They are fundamentally doing a bad job of targeting or cross selling opportunities in their customer base.”
Todd Shryock ([email protected])is SBN’s special reports editor.
