Banks are a'knockin

[JSJAG]

Ever since Glass Stegal fell my bank has been very agressive in its entrance into the security business. Then the Comptroller gave the nod to entering head first into the insurance business. For a while I have been getting invitations to check out their annuities and life insurance. Today I received an invitation for their auto insurance U/W by Liberty Mutual. The invite says that a special discount is given to bank customers. They also mention asking about their HO insurance.

Has any one else seen an accleration of banks entering the P&C business.

Do we think that bank customers are truly getting an affinity program discount?

Perhaps in the future banks will be the main distribution system for LIfe, Health, Annuities, P&C and Securities. The ABA is a very, very, very big lobby and have the ears of the politicians. Hm????

[Big Dog]

"Banks in insurance" has been a 'threat' for as long as I've been in the industry (which is 25 years - geeze!).

Playing my usual devil's advocate position - - is it really that much of a threat? Your average consumer is better educated when it comes to insurance nowadays. Yeah...they might take a look at a quote that their bank gives, but if it isn't as competative as what they currently have, then who'd wanna switch?

Banks, or any insurance agent for that fact, need to bring actual value to the services they provide. My opinion - they can't. Banks have been trying to get into the "financial planning" arena. Selling life insurance or annuities or maybe a mutual fund or two doesn't qualify as financial planning. Banks will need to take the next step of actually hiring seasoned insurance people and financial planners, AND PAY THEM WELL to make actual inroads. They haven't, and probably won't do that....

[JSJAG]

You and I have the same amount of years in the insurance business. The thing that is different from previous thrusts is that Glass Stegal has been removed and the Comptroller has tipped its hat to the banks going forward.

Never before did you see banks opening buildings with an explicit name of ya da ya da Bank Insurance Agency or Ya da ya da Bank Investments. That never happened in the past. If you consider economies of scale banks are giants.

You are correct that today's consumer is more savvy but that doesn't change the distaste people have for insurance people. We are way down on the list BUT Bankers are (why I can not say) first on the list of trust worthy. So if the bank says they have a deal, they give said client a quote, saves said client $500 will my commercial client take the time to make sure that their plate glass is covered or tools are on that Inland Marine Form? Not sure about that one?

Today's environment is very different than it was in 1981. Today's consumer (it is a stat) does not consider loyalty or service as a high priority when they buy insurance. If loyalty and service were high on their insurance wish list, all those TV "call me" centers would not be growing.

Banks are not going away. Selling a few securities and annuities here and there is not what is happening. Last year banks were the number one seller of EIA's and closing in on the securities industry.

There is nothing to stop a bank from using insurance as a loss leader. All the bank must do is cut a deal with a P&C insurance company, to remove just 10 percent from the UW spread and you are dead meat. Explain to a client why they can get a CNA policy from their bank (exact policy) for $1,000 but the same policy from you would cost $1,100?

I will explain it to my clients but my average client has been with me for 9 or 10 years. Many of my clients have been with me for 20 years or more. I think that most of my clients would stay with me even if it cost another $100.

I think it is folly to consider the banks will fail, as they always have, in the insurance distribution business.

[Big Dog]

I wouldn't worry about your commercial clients. Unless the bank-owned insurance agency hires an insurance heavyweight (i.e. someone that really KNOWS insurance coverages), the bank really can't compete on commercial clients.

As to "cutting a deal" with an insurer, can you say Spitzer! Insurance carriers will run scared of anything that even smells like this.

Will banks make inroads to personal lines client? Probably. Small commercial? Maybe. Your larger clients. I doubt it. Like I said, unless they hire some "heavyweights", they won't be able to deliver on what a good regional or national broker can provide.

Besides - think of the "quality" of service you get from your bank. As far as I'm concerned, I get better service at the ATM than I do walking into the bank...

[JSJAG]

I wouldn't worry about your commercial clients. Unless the bank-owned insurance agency hires an insurance heavyweight (i.e. someone that really KNOWS insurance coverages), the bank really can't compete on commercial clients.

As to "cutting a deal" with an insurer, can you say Spitzer! Insurance carriers will run scared of anything that even smells like this.

Will banks make inroads to personal lines client? Probably. Small commercial? Maybe. Your larger clients. I doubt it. Like I said, unless they hire some "heavyweights", they won't be able to deliver on what a good regional or national broker can provide.

Besides - think of the "quality" of service you get from your bank. As far as I'm concerned, I get better service at the ATM than I do walking into the bank...

Number one: affinity group programs are already a cut deal and that is what the bank is offering. the question arises, how deep of a U/W cut can the bank get the insurer to offer. Nothing illegal with it at all.

Number two: I live in a town of 300,000 people. The city's second largest insurance agency was bought up by a bank. Perhaps a few of the heavy weights stayed...just maybe.

Number three: small commercial is the base for many, many, many medium sized agencies. Personal lines is also a profit center for agencies. Banks are going to only take the business that is a profit center to them, easy to write, easy to service. That side of the business keeps many agencies alive.

The writing has been on the wall since 1984 when the S&L crisis took them all down. It took a while but the banks saw the crack in the wall. No longer are they happy with a 3% spread on their money. Now 23 percent of their profit comes from fees and the credit card business profit is obscene.

Exactly how much business will the banks be allowed to own and run. Answer: however much their lobby can spend to buy the most politicians.

[independent guy]

The other day I saw a guy on TV from the local BANK talking about homeowners coverages. When he's talking about securities, he knows what he's talking about. But he didn't seem like he knew homeowners at all. But, they have him on there because he's the president of this particular bank's insurance and securities center in town. It was sad, he rattled on about the importance of good insurance coverage, but he couldn't really say much about what that was. I think his bank also sells Liberty Mutual products.

[JSJAG]

Apparently Liberty Mu. has made a deal with banks because my bank is also selling Liberty Mutual.

Now that brings up the entire discussion of "how many banks" really exist today. In 1985 my vote was eventually there will be only 4 banks, the remaining many different names will be part of the 4 banks holding companies.

Having said that, it is interesting that you also saw Lib Mu. being sold by the bank. I am wondering if Lib Mu made a deal with one of the big remaining banks and that contract filters down to all the smaller banks that are owned by holding companies?