Banks loom large. (E-Fusion Conference: Selling; Technology).

Financial institutions, especially banks, want to add insurance products to the mix they provide their customers through e-distribution, and insurers can either position themselves to be part of the new strategy or be left behind, according to one banking and technology executive.

"A significant percentage of insurers are going to move to this distribution channel in the future, so it's worth considering if you want to be among them," said Eric Denham, vice president of Pivot/Info-One, a technology provider owned by Wachovia Corp.

Banks are attracted by the huge market potential in insurance, Denham said. In 2000, $735 billion of life insurance, property/casualty insurance and annuities was sold nationally. Banks represented only 6.1% of that total, so there's quite a significant upside opportunity, he said. "Banks are also very good at cultivating online customers," he said. First Union Bank, a part of Wachovia, went from zero to 1.3 million online customers in less than a year, he said. Banks have a high level of trust from their customers and can leverage that trust for insurance sales.

Banks don't want to have to deal with numerous proprietary systems, so insurers will need infrastructures that let them be part of an integrated system. And, since banks are partnering with several insurance carriers, the carriers will need to partner with several banks and other financial institutions.

The most important attribute of successful partnering is the support of the bank's senior leadership, he said. "Insurance may be competing with other bank products, so you have to be sure management is behind it."

Another factor in success involves insurers and banks being sure the insurance products they offer integrate seamlessly into the bank's business, such as offering auto insurance to complement auto loans. "Consider, for example, that 50% of people who have loans buy credit insurance," Denham said. They must also have the right technology to minimize the complexity of the insurance process.

Also, some banks sell only private-label products, so they may want to rename an insurer's products. And if an insurer doesn't have the infrastructure to support a multicarrier environment, it may have to outsource the service.

Most banks will want the insurer's online presence to blend seamlessly into the bank's Web site. "They'll want it to look like the person never left their site," Denham said.

Ways insurers and banks can enhance the online experience include putting information a click away from producers, offering a common format to view all product data and allowing for select or preferred carriers to be highlighted.

Full-scale offering of insurance products through financial institutions' e-distribution is still more of a promise than a reality, but it's coming, Denham said. "You'll know it's happened when you see 'banking, investments and insurance' on the sign outside your bank," he said.

Banks Selling Insurance

Percentage of 366 banks surveyed.


Marketing general lines insurance, plus     41.4%
credit coverage and/or annuities
Marketing general lines insurance only       7.2%
Marketing annuties and/or credit coverages  21.6%
but not general lines insurance
Not marketing annuities, credit coverages   28.8%
or general lines insurance.

Source: Conning & Co.

Note: Table made from pie chart