Bank P and C

[BANKERFA]

Hi all!

I joined the forum to get input on an idea that is floating at my bank. Here goes.

I am the Director of a financial services subsidiary of a small community bank in NC. However, the subsidiay does little more than sell investments and broker mortgages, both of which seem to be gloomy prospects for the forseeable future in our market. In an effort to bolster revenues and expand our market, I have proposed that we add a P and C agency to our subsidary. We write car, home, business, and commercial property loans through the bank, but send the customers elsewhere to place insurance. My question to the gurus, how is this best accomplished? Should we look at a group like Superior Access, get a contract with an established P and C outside our market, or just call up the companies we want to do busness with for direct appointements? Also, what is the difference in revenue for each of those paths. Hope someone can help. Any input would be great.
- - - - - - - - - - - - - - - - - -
anybody?
- - - - - - - - - - - - - - - - - -
anybody??

 

[djs]

I guess I wonder what would cause a bank to want to go down this road. If you do, I would suggest getting direct contracts, but, you won't be able to cover all markets doing it this way.

Personally, I think banks need to go back to banking. Might be a view not shared by many, but focus on the core business till it is back in shape.

Dan

 

[BANKERFA]

Our core banking business is just fine. We have plenty of cash and low loan losses b/c we underwrite well.

Why go down this road? Through the subsidiary we have provided life, annuities, equities, and REITS. So we know the financial rewards and have experienced sales personnel. Why not leverage that sales force against our client base to provide for our cutomer's need? At the same time providing the bank with a new, steady source of income.

I was hoping to get some input from you that would be helpful. Would you care to provide such? Please don't take that the wrong way. I mean to say that we have decided that we think it will be lucrative. What I need now is help with implementation.

 

[saieddie]

With the trust and confidence people put in their banks, I'd make sure my bank insurance agency had a solid foundation. Hire someone who has owned or managed an insurance agency. They'll know how to go about securing appointments, marketing, and agency management. If you just want to do it 1/2 ass, call up superior access, iroquois, or smartchoice, and try and do it yourself.

 

[BANKERFA]

Thanks for the info Eddie. Question? What is the difference in pay structure between a group like Superior and a direct appointment? I see that Superior pays roughly 15% up front and 10% for renewals. Can you do better if you get direct appointments? If so, what are the percentages.?

We know of a few people who we can bring in who have owned agencies before. However, right now we are trying to get a grasp on expected income.

As I type, a banker is telling me that he needs to get a performance bond for a $6,000,000 hotel project. Why give that to someone else?

 

[saieddie]

Commissions vary by company. The reason I'd give up the performance bond is the same reason I don't sell pet insurance, vehicle warranties, mortgages, or investments. Focusing on my niche market increases my ROI and allows me to service my clients better. Screwing up on a little pet policy may piss the client off enough to move all his business and that of his referrals.

 

[1manshow]

Direct appointments will net approx 30% more commission. Our overall avg. is 16% new and renewal incl contingencies. Pure profit is around 9% for our agency.

This sounds like an interesting idea. I'd be interested to see how long it would take for you to convince companies to contract with you based on the bank relationship. Most companies have not been comfortable with this type of relationship in the past. I'm wondering about the legality of this type of loan/insurance arrangement ?

 

[warrenins]

Couple of thoughts for you.
Direct contracts are not easy to come by on the best of days. A lot of "standard" companies want tangible history concerning losses, experience etc...

I think you will definitely have to have an experienced agent behind you that knows how to talk to the insurance companies. In some cases the "standard" companies are more consertvative than banks. When a company gives you an appointment they are giving you the authority to bind them to a particular risk and they have to be convinced you know what to look for when writing the risk.

Direct appointments are always more lucrative (bonuses, profit sharing etc...) but you have to weigh it out. You will be expected to write a specified premium amount in a ceretain time period. If you don't meet these requirements you might get the contract cancelled.

You also have to factor in agency management systems, which can be very expensive. Customer service is key.

Overall not a bad idea, after all BB&T has made the model work. Do your research first. Sometimes the easiest way to get into the business is to buy an existing agency and along with that the contracts, the staff, the software etc... If I'm not mistaken that's how the BB&T model operates these days.
- - - - - - - - - - - - - - - - - -
Oh and for bonds, that's the easy one to get contracted for. It's the commercial insurance that's the tough one. Bonds are far from insurance.
Just e-mail me if you have questions.
Mike

 

[BANKERFA]

Thanks guys, some useful info. I don't have enough posts to pm yet. So, warrenins, could you PM me with a way to contact you if i have some questions along the way. I would greatly appreciate it.

 

[mazz8]

I'm curious to see what standard company would give you an appointment. Most standard Insurance companies have their own banks and financial products that they want to be pushed.

You would be in direct competition with them with various annuity products you currently sell.

Just my opinion, don't be the high insurance pusher. That may discourage your customers from doing business with you or think you are not looking out for their best interest.

Also a lawyer would love to place an E&O claim against a bank..lol..they have all the money.

Understand there will be customer service needed. If you get a lot of contractors expect a super busy request for cert. of insurance.

You will have another full blown business with your current business. Its not a side business.

Wish you the best of luck. Expect Insurance agents in your area to come after your customers as well. You will have more competition for your other various financial products.

Good luck and I would love to know the outcome.