Now the insurance man sells bank products

The days when Farmers Insurance agents like Greg Chase of Des Moines, Iowa, could make a living just selling automobile and homeowner policies are fast ending.

Mr. Chase, part of an army of 17,000 Farmers agents, is being groomed for the far broader role of a financial services provider.

“We’re moving in the direction of an advisory role as opposed to the insurance agent of old,” says Mr. Chase, who is in the process of getting licensed to sell Farmers’ new line of mutual funds.

“It used to be a lot simpler,” he says. “I used to do a lot of insurance quoting, and yet with these new products, we do become more advisory professionals as opposed to quoting professionals.”

The trend is accelerating as Farmers and its competitors, State Farm and Allstate, start offering banking and investment products through their agents. And while opening up a checking account, buying a CD or taking out a loan from the person who used to just handle insurance might seem odd, observers say it’s too novel an idea to discount.

“If you asked consumers if they wanted to do banking through their insurance agent, it wouldn’t have dawned on them,” says Michael White, a bank and insurance consultant in Radnor, Pa. “It’s up to the agents to present their new wares and for them to sell it in a way for the customer to say, `Hmm, that’s convenient for me. I don’t have to go to as many places to get all this business done.’

“That’s its appeal, but that approach has to be sold,” Mr. White says. “It’s not being consciously made by most consumers.”

into banking

The top three property-and-casualty insurers are ushering in the change by offering banking services, but it will require aggressive marketing and some changes in the mind-set of agents to make it work, experts say.

Already, State Farm Insurance Cos. in Bloomington, Ill., operates its own bank online and in agent offices in 11 states. It plans to get more agents trained this year in order to offer services nationwide.

Northbrook, Ill.-based Allstate Corp., which received its thrift license in 1998, plans to launch its bank through agents later this year.

Farmers Insurance Group Inc. in Los Angeles announced last month it would take a different approach by forming a partnership with Bank of America Corp.

Under the agreement, the Charlotte, N.C., bank would have Farmers agents stationed in its branches to sell insurance, while Farmers will offer checking and savings accounts and consumer loans through its agents’ offices.

The deal comes on the heels of a Farmers program unveiled in November for agents to become the “trusted adviser” to clients by offering a suite of mutual funds and annuities, as well as products of its parent company, Switzerland’s Zurich Financial Group, says Stephen Leaman, president of Farmers’ personal-lines insurance business.

Zurich Financial owns the Scudder brand. To date, about 3,000 agents are licensed or in the process of being licensed to sell the investments.

Mr. Leaman says the deal with Bank of America rounds out Farmers’ emerging role as a financial services company. But the transformation of agents into one-stop financial providers isn’t a simple one.

“There have been precious few successes in converting what we’ll call a property-casualty agent into a seller of a broad array of mutual funds and investment products,” he says.

The problem is less with the customers than the sales agents for whom selling auto or homeowner policies is simply a sales transaction.

“An investment sale is more about personal relations and personal trust,” says Mr. Leaman. “We have to get the agents thinking differently about this process, and I don’t know if that’s been done well by others previously. We’re in the middle of that. I think the spoils in this case go to those who execute well.”

The alliance between Farmers and Bank of America, which will start as a pilot program in July, is meant to give each company access to the other’s distribution channel. They reach a combined customer base of 37 million households.

The mergers of banks and insurance companies predicted after the passage of the Gramm-Leach-Bliley Act – the 1999 law that eliminated the walls between banks, brokerage firms and insurance companies – hasn’t materialized, analysts say, with the cost of a bank becoming an insurance underwriter not worth the potential return on equity.

Instead, banks such as Wachovia Corp. and Wells Fargo & Co. have chosen to purchase established commercial-lines agencies, and insurers such as State Farm and Allstate have gone the route of starting their own banks – avenues that could have been pursued without the passage of Gramm-Leach-Bliley, analysts say.

Kenneth Kehrer, president of his own bank-insurance consulting company in Princeton, N.J., says Farmers has taken a less risky approach than its competitors.

“It’s going to be hard for insurance agencies to sell banking products,” says Mr. Kehrer, but consumers are more apt to use products from a Bank of America than a State Farm Bank. “A lot of middle-market customers are kind of hesitant to throw their money into some new thing that’s not so banklike.”

As for Mr. Chase, the Farmers agent in Iowa, he’s not sure where it all will lead. “Is it going to fly and cause my business to double, triple or quadruple? We don’t know,” he says. “But we need to be able to be a bigger provider than we’ve been.”