ABA Banking Journal - April 2008 - (Page 28)

Community Banking S&T Bank’s Tom Kiral says many commercial lenders treat their customer contacts as personal property when referrals to the insurance side are requested. Their attitude is: “It’s my customer, and you’d better do a good enough job at it so you don’t tarnish the relationship.” said that good agents try to avoid putting “square pegs in round holes.” Besides not wasting time and effort, he said, the intent is to avoid a situation that “is not a good experience for the customer.” One point in common among all panelists was the belief that turning bankers into insurance sales people isn’t the best strategy. It is better to bring in experienced people who know insurance. Barry Seigerman, president of Smithtown Insurance Agents and Brokers, Inc., East Setauket, N.Y., which is part of Smithtown Bancorp, capsulized this by way of a quip: “What’s the difference between a good insurance broker and a great insurance broker? A good insurance broker is someone who knows the coverage. A great insurance broker is someone who knows the adjuster.” Wilson, Kiral, and Seigerman were joined by Paul H. Cornell, deputy CEO for Spirit Bank, Bristow, Okla., and working out of the bank’s Tulsa office. Each presented their take on getting into the insurance business. The session was organized by ABA’s affiliate, the American Bankers Association Insurance Association, “ABIA,” headed by veteran ABA lobbyist Kenneth Clayton, ABIA managing director. One lesson came in the area of compensation. Wilson said that at one point the bank experimented by bringing an agent into a bank-style compensation scheme. This attempt at integrating cultures failed, dismally, and he warned other bankers against this “dangerous” idea. The agent stopped selling. Why? “Unfortunately, he was pretty happy with the salary and he lost his incentive to sell,” said Wilson. The bank backpedaled on that notion once this happened. Another lesson came in the area of structure. The bank’s agency is an independent one in such areas as life and health insurance, but is a captive agency in the personal property and casualty business. The bank lost a key employee in the personal property and casualty operation and this cost it considerable momentum and profitability. “It takes a long time to develop a revenue stream off of personal P&C,” said Wilson. Even with hiring an experienced P&C agent to replace the one who left, starting a book of business from scratch takes time. In addition, Wilson said a captive operation has severe drawbacks, by its nature. When a bank makes an effort to grow a captive operation—and the bank has grown a nice piece of business in P&C, Wilson said—it is growing an asset that ultimately belongs to someone else—the carrier that the captive really belongs to. “You can’t sell it,” said Wilson, “and the agent belongs to someone else.” Wilson walked the audience through other lines, to share what his bank has learned. While the operation has produced revenue, he’d like to improve from the present $300,000 annual figure. Take life insurance. “Life,” said Wilson, “is quick and you make a lot of money, if you work hard.” The bank offers both term and permanent life. Consider group health. Wilson said this produces a decent revenue stream, one that “lasts forever, as long as you service the customers.” Investment products, on the other hand, aren’t so good. “It’s a risky business, it requires a lot of certifications, and you have to do a lot of work for little commission,” Wilson said. Among such products offered by the bank’s agency are mutual funds, annuities, and various types of retirement accounts. And personal P&C, besides the points made earlier, “is a lot of work for little commission, too,” he said. The bank offers homeowners coverage and also farm policies covering both weekend and full-time farmers, for dwellings, barns, equipment, livestock, farm products, and liability. Wilson said his bank has found that synergy has to be exploited carefully. Tellers can pick up many kinds of leads that can turn into insurance business, for instance, but he said that tellers are expected, today, to have their radar up for many types of business opportunities. This is a great deal to put on their shoulders, and the bank has struggled to find the right balance. Today, to encourage referrals by staff, the bank awards flat-rate commissions in the form of gift cards. In light of the bank’s experience thus far, the bank is shopping now, not for an acquisition, but for a partnership with a large commercial insurance agency. “We think we’ll have more success with that,” Wilson said. He said his bank is committed to making insurance work, but noted that some institutions, after his bank’s mixed beginnings, might have decided to exit insurance. He warned lis- Starting from scratch in “P&C” Insurance has been a learning experience for The Bank of Fayette County, $220 million-assets, which started its operation in 2004 by acquiring an agency. Fayette County Insurance is structured as a division of the bank. Wilson characterized the bank’s experience as a series of lessons learned, with results about at breakeven if all costs are allocated to the insurance operation. 28 APRIL 2008/ABA BANKING JOURNAL Subscribe at www.ababj.com http://www.bankofsmithtownonline.com/home/home http://www.spiritbank.com http://www.aba.com/Solutions/Insurance.htm http://www.aba.com/Solutions/Insurance.htm http://www.bankoffayettecounty.com http://www.ababj.com

Table of Contents Feed for the Digital Edition of ABA Banking Journal - April 2008

ABA Banking Journal - April 2008 Contents Editor's Column You Can't Beat Wal-Mart: Or Can You? Snapshot: Non-Interest Income Shoulders More Weight ABA National Conference for Community Bankers Report 100th Anniversary: Then & Now ABA Resources ABA Chairman's Position Banks Plus Insurance: How to Make It Work Pass the Aspirin 2008: Year of Rich Internet Apps? Tough Time For That IPO Your Audience Needs to Know Who You Are Telepresence: Costly But Very Cool Webnotes Better Websites Mean Tougher Compliance Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - April 2008

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