Study Finds Banks Reinvigorating Life Insurance Sales

Windsor, CT, January 14, 2004 � The 2002/2003 Kehrer-LIMRA Bank Life Sales Study shows strong increases in sales and profitability for the typical bank selling life and health insurance, rebounding from a period of flat sales to outstrip overall industry results.

“The typical bank in our survey increased its total life/health revenue by 22 percent, new life sales revenue by 19 percent, and notably, the profit contribution of its life business by 87 percent in 2002,” said Ted Johnson, a marketing director at LIMRA International and co-author of the study. “Industry-wide in the U.S., annualized life premium grew only 3 percent in 2002.”

This fourth annual survey from the collaboration of Kenneth Kehrer Associates and LIMRA International covers 56 banks and credit unions broadly representing bank life sales activities. The study finds banks are once again making significant gains in selling life and health insurance, after progress stalled in 2001.

The banks studied had average total revenue from life and health insurance marketing of $1.70 per bank-customer household in 2002. The average bank’s new (first-year) revenue from selling life/health insurance divided by the total number of bank-customer households was $1.39.

“Banks can improve their results by using multiple distribution methods to sell life insurance,” Johnson noted. “More than half of the banks studied use only one or two methods to distribute life insurance and 91 percent rely on just three delivery methods. Broadening life/health delivery methods is another key to improving customer penetration of life and health insurance.”

While banks use a variety of methods to distribute life and health insurance, some are more successful than others. The average advanced agent selling to bank trust and commercial banking clients produced $204,602 in first-year life/health commission revenue for the bank agency in 2002, more than three times the annual sales productivity of the typical full-time retail bank agent selling to bank branch customers.

Licensed bankers had average annual life/health productivity of only 2 percent of the productivity of retail agents and 18 percent of the annual gross life production of financial consultants. Advanced agents provided the best opportunity to generate meaningful revenue for the bank. However, advanced agent distribution was not as clearly dominant as it had been in previous years as banks have been challenged to recruit and retain advanced agents.

LIMRA International is a worldwide association providing research, consulting, and other services to nearly 850 insurance and financial services companies in more than 60 countries. LIMRA was established in 1916 to help its member companies maximize their marketing effectiveness.

Kenneth Kehrer Associates provides research and consulting services on bank distribution of insurance and investments. Dr. Kehrer’s studies of customer penetration and compensation practices have helped establish the banking industry’s benchmarks that define best practices.