Gap Widens between Small and Large in Insurance Sales (2003)

Bank sales of insurance is skewed in terms of both levels of participation and revenues generated, according to the 2003 ABIA Study of Leading Banks in Insurance. Highlights from the sixth annual study, conducted by the American Bankers Insurance Association (an ABA subsidiary) and Reagan Consulting, Atlanta, are presented here. The full study was to be released at the ABIA Annual Conference Oct. 8-10. Reagan Consulting surveyed 2,475 U.S. and thrifts--all those above $1 billion in assets and a random selection of those below $1 billion. From these it received 406 usable responses. Among the 48 leading banks, the three-year compound annual growth rate for general insurance revenues was 33.2%, including 35.4% for above $10 billion in assets and 30.8% for those below. (Leading banks is defined by two primary criteria: 1. sales of general insurance products for at least three years, and 2. a minimum of $1 million in general insurance revenue. General insurance refers to property & casualty and life & health.) These growth rates include both organic growth and acquisitions. Fueled by the latter, and by hard market conditions, growth was strongest in commercial lines, including commercial property and casualty (29.5%) and group benefits (35.3%). This compares to three-year CAGR for personal p&c of 19.1% and 15.16% for individual life and health. Participation gap grows Another key finding was that only 51.8% of with less than $1 billion in assets report participating in any form of insurance distribution (Chart 1). Only 32.7% of these report selling general insurance products versus 65.7% of with assets of $1 to $10 billion, and 91.3% of with assets greater than $10 billion. [GRAPHIC OMITTED] The 32.7% participation rate among smaller is the lowest rate reported by this group in the last three years, whereas the participation rate for the mid-size is the highest level reported for this group. The report notes, however, that because the survey universe changes each year, it should not be interpreted that general lines participation among smaller is declining. But clearly a significant participation gap exists. As shown in the table at right, credit life has the highest participation rate, at 42.8%, but the presence of term life in the number two spot, at 37.6%, is the first time that a product other than credit insurance or annuities was among the top three products distributed. The research found that 10.7% of the reporting began selling term life insurance within the last three years. The study creates what it calls a Momentum Index, calculated as the percentage of planning to distribute a product within the next two years plus the percentage of that began distributing the product last year. The product with the most momentum was commercial p&c insurance sold to small businesses (defined as businesses with $10 million or less in revenues). Three other products had momentum only slightly less: long-term care, commercial p&c sold to larger businesses, and disability insurance. The last two had the same score. Acquired beats de novo For years, consultants have counseled bankers to buy agencies, not try to build an insurance business from scratch. Despite that collective advice, this year was the first time in the six years of the study that an acquired agency was the most common primary distribution platform for all four general lines. …