Building a Premium Business

By Jonathan E. Curley

‘Why aren’t we selling more life insurance?”

When I first started consulting I’d usually answer by saying: “It’s complicated.” That answer usually didn’t make the bank executive that asked the question very happy, and rarely resulted in getting me hired. But after more than 20 years of working on all sides of the bank-insurance business—as a producer, as a bank-insurance leader and insurance company life division head—it’s clear to me that it is indeed very complicated.

I had my own ideas why banks had not seen the success that either they or the insurance industry had expected, but I wanted to ask others in the business what they thought. I didn’t want them to tell me what had gone wrong in the past—I’d spent plenty of time analyzing my own mistakes. I was much more interested in what people in the business could tell me about what we all needed to do to sell more insurance.

I talked to more than 50 bank executives, bank-insurance leaders, producers, brokerage general agents and wholesalers about what they believed banks needed to be successful. What I heard was surprisingly consistent—and surprisingly simple—and it really came down to two things: banks need to build a solid foundation for their insurance business to succeed, and then the business needs to execute on a small number of fundamentals. I’m going to cover what I found out about building the foundation here.

Leadership, alignment and people
Leadership that both understands the realities of the economics of insurance distribution and appreciates the unique culture that makes insurance organizations successful is the cornerstone of the bank insurance foundation. With that understanding, leaders are able to build realistic and effective goals for the business and create an environment to hire the right people to achieve those goals.

Virtually no business reaches its potential without effective leadership. But in this case the bank-insurance leaders I spoke to suggested that the senior bank executives to whom they reported needed to do a better job creating an environment that would allow the bank-insurance business to succeed.

One roadblock to creating that environment for success was a lack of understanding of the economics of insurance distribution that led banks to set unreasonable, even unattainable goals. Where banks measure performance often in terms of return on equity or expense efficiency, insurance distribution rarely performs well on those two metrics. But where bank-insurance generally uses little capital, it is often best measured on margin, or contribution. This mismatch in metrics often leads to underinvestment in the insurance business.

The question is often asked: “Why take on 60 or 70 cents in new expense in the insurance business to drive a dollar in new revenue, when we can spend 40 cents or even less to drive a dollar of new revenue somewhere else in the bank?”

It’s a good question. And a difficult one to answer unless there is clear agreement and complete alignment on what the goals for the insurance business are. With goals such as increasing revenue per customer, products per customer or customer retention while delivering a reasonable margin, insurance can be an important part of the overall bank business strategy.

Similarly, unless leadership understands the unique culture of insurance sales and embraces that culture, it will be impossible to attract and retain the right people to deliver a quality insurance experience to customers. Over and over, the culture clash between insurance and banking was mentioned by bank-insurance leaders and bank executives as one reason for challenges in making insurance work.

And there is plenty of blame to go around as to why these culture clashes exist. Some banks push hard to integrate insurance sales professionals into the highly regulated, compliance-driven, risk-averse world of banking without proper communication and change management efforts. Meanwhile, producers too often fail to make the effort to cultivate bankers as centers of influence to drive referrals. In fact, some insurance producers are not built to function within a bank-insurance environment. Both sides—the bank and the bank-insurance business—must work hard to build a mutually effective culture.

As with almost anything else in business, unless the foundation is strong, bank-insurance will ultimately suffer in its ability to execute on the fundamentals that make the business successful.

Jonathan E. Curley is principal of Curley Consulting and a featured speaker at this year’s ABA Bank-Insurance Sales Conference.