The roll-up strategy will enable the bank to accomplish two things. It creates a broader base for the bank to offer its financial products as well as creating a significantly diversified earnings stream from insurance-related sales. Commerce Bank of New Jersey is a good example of this new strategy. Although it has not declared itself to be in the roll-up business, it already has acquired a number of agencies in order to meet its goals. What consolidation means for agencies Banks have some inherent advantages in the sale of certain insurance products.
Banks have access to clients and employ sophisticated technology for easy customer interaction.
For personal and small commercial lines business, banks have the ability to provide lower-priced products than are generally available through agents. Customers may favor bank distribution of insurance products primarily because of the low pricing, the convenient location of banks and the interaction with familiar people. However, banks and other financial services institutions do not have the level of knowledge and expertise required to service the more sophisticated commercial accounts. In order to provide the level of service preferred by potential customers, these institutions will need to partner with capable independent insurance agencies. Typically, agencies need to be of sufficient commission income to be able to justify developing the infrastructure to service the more complex risks.