Banks in Insurance

Banks in Insurance

Banks of all sizes continue to add insurance products to their rosters and expand their sales of existing products, according to the American Bankers Insurance Association 2002 Study of Leading Banks in Insurance.

Banks in Insurance

Overall, bank sales of insurance grew 23% last year, to an estimated $55 billion, the association said. This was the biggest year-to-year increase in the study's five-year history. Commercial lines grew the most; estimated premiums in the category grew 65%, to $8.9 billion.

Rising prices for commercial lines insurance and some major agency acquisitions by banking companies contributed to this growth, said James Campbell, a senior vice president at Reagan Consulting in Atlanta, which did the study for the ABIA.

In addition, "we're really seeing the programs become more broad-based," he said, as banks that had sold one type of insurance added products.

More banks are offering both life and health and property/casualty insurance, according to the study -- 60% of those active in selling general insurance sell both. In 2000 the proportion was 53%.

In addition, 66% said they were distributing insurance to both retail and business customers, compared with 64% in 2000. General insurance includes commercial and personal property/casualty, as well as group and individual life-health but not annuities or credit insurance.

This product expansion is "logical," said E. Kenneth Reynolds, managing director of the ABIA, "because one of the reasons institutions have moved into the insurance business is because they want to broaden their product line."

Mr. Reynolds said that, though the amount of insurance sold through banks "is a pretty significant number, at the same time it's a very small percentage of the total premium volume" sold in the United States. Banks still have a lot of opportunity to grow, he noted.

The most popular product overall remains credit insurance, which was distributed by about 60% of the surveyed banks; annuities were distributed by slightly less than 50%.

But though more banks distribute credit insurance, Mr. Campbell said, annuities are the No. 1 product in banks measured by dollar volume.

And credit insurance products -- including credit life, credit disability, single-premium credit life on real estate loans, and monthly-outstanding-balance credit life on real estate loans -- are four of the top five products that a small share of banks say they plan to stop distributing.

Many credit insurance products have fallen out of favor over concerns that the coverage is unnecessary and costly and that banks and credit card companies push it on customers.

Mr. Reynolds said, however, that credit insurance and debt cancellation products are important for customers who for various reasons cannot obtain traditional life insurance.

There are a lot of customers out there who won't go through the examination procedure and all the other requirements to receive term life insurance, he claimed, and these consumers "would be less well protected in the future than they might have (been) in the past."

The survey also asked banks whether they have added products within the past year. The biggest gain was in long-term-care, with 8.1% of banks adding that product. Commercial property/casualty was second at 5.9%, and 5.8% added term life.

Mr. Campbell called long-term-care coverage a "hot product" that was distributed in 36% of banks last year -- up from 30% the year before

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