BISA Magazine - Quarter 3, 2016 - 20

FEATURE STORY Financial Institutions' Perspectives on Life Insurance Programs Agree/Strongly Agree Neutral programs. One inhibitory factor is that FAs and LBEs sometimes have trouble beginning and sustaining a conversation with customers about life insurance, Leary told us. Disagree/Strongly Disagree My institution is receiving the support we need from our carriers/TPMs to be successful 36% My bank or credit union will increase the methods it uses to sell life insurance in the future 50% 33% Direct-to-consumer strategies (mobile, internet, etc.) will become more critical to our success with life insurance 50% 31% Consumers will increasingly look to banks or credit unions to meet their insurance protection needs 61% Recurring premium products will be a core part of our sales mix in the future become more critical to our success with life insurance 75% Growing life insurance is an important priority of my institution 78% 47% 17% 17% 19% 17% 22% 17% 14% 8% 8% Source: Bank Perspectives on Life Insurance 2016, LIMRA their retail customers, of course, but as LIMRA research notes, life insurance ownership (generally) in the U.S. is near historic lows, and there remains considerable opportunity in the middle and mass customer segment. There are cross-selling opportunities, too. Many of these millennials who will be looking for life insurance don't even have a financial advisor - so, as Leary said, more institutions today recognize they are being offered a real opportunity to sell to this segment. More permanent insurance Seventy-five percent of the survey's participants agreed that a "recurring premium will be a core part of our sales mix in the future." As with life insurance penetration generally, there appears to be persistent optimism vis-a-vis permanent insurance. In fact, about half of life insurance sales in banks and credit unions are single premium products, which has been the case for years, LIMRA notes. Perhaps this is understandable given the similarity of single premium whole life (SPWL) insurance and fixed annuities - the latter a big success story for U.S. banks and credit unions. 20 www.bisanet.org However, if banks are to sell more recurring premium (i.e., permanent) life insurance, they will probably need to more completely embrace industry best practices, observed Leary, including selling through all distribution channels - not just branch-based financial advisors (FAs) and licensed bank employees (LBEs). Other alternatives might include a bank's wealth management unit, its website, ATMs and customer statement stuffers. Senior management support remains critical if banks are to succeed in this area, but it isn't always forthcoming. Insurance specialists within institutions often claim they can't succeed because senior bank management won't allocate the necessary resources to them. On the other hand, life insurance generates so little revenue for banks overall that it's hard to convince senior management that it's even worth doing, so support isn't always there. It is a kind of "chicken or the egg" problem, Leary acknowledged. Starting a conversation In spite of perennial optimism, life insurance remains mired in single digits in terms of product share in all but a relatively few bank investments "One way to overcome this reluctance is to conduct a life insurance policy review, a practice employed by more banks these days," said Leary. FAs and LBEs ask customers to bring their life insurance policies into the bank. Those policies are then reviewed by the advisor, or a bank-based life insurance specialist, or even the bank's life insurance wholesaler - this service is free. The review might reveal that everything is in order or the review may show that the client is underinsured - a common circumstance when incomes and family sizes are growing. "It's a non-threatening way to have a conversation," said Leary. Looking ahead, most banks anticipate that branch-based FAs and LBEs will still be generating most insurance sales five years hence, but half of surveyed banks (50 percent) believe that directto-consumer strategies (mobile, internet, etc.) will become more critical to their success with life insurance. Is carrier/TPM support lacking? One surprising finding in the study, and one that jumped out specifically to Leary, was that only 36 percent of the best practices banks and credit unions agreed they were receiving the support they need from their carriers/TPMs to be successful. (Forty-seven percent were neutral and only 17 percent selected "disagree/strongly disagree.") Leary would have liked the opportunity to follow up here. What type of support was most lacking, for instance? The answer might come in a future survey. This finding stands in stark contrast, however, to the generally positive views expressed by most of the participating institutions in the current study. ▲ http://www.bisanet.org

Table of Contents for the Digital Edition of BISA Magazine - Quarter 3, 2016