Welcome to the first edition of the American Council of Life Insurers' Financial Services News Update—2002, your source of insurance and related financial services news. As a top executive in your field, you may not have the time to read all the industry news, so we locate the hot topics and follow the trends, then provide them to you in this short e-letter format. Enjoy this and future issues—and pass it along to any of your associates who might find it useful.

Contents
• State Farm Counts Clicks Rather than Bricks
• New Research To Be Unveiled at ACLI Symposium
• Insurers Should Follow Lead of other Financial Services Segments
• Insurance Experts Come Together at Symposium
• One Rep at a Time
• Banner Year for Life Insurers' Mortgage Lending
 

State Farm Counts Clicks Rather than Bricks

State Farm is hitting the Internet hard in hopes of becoming a premier bank. The largest car and home underwriter in the United States with 16,000 agents will soon have that many offices supplying banking information about State Farm Bank across the U.S., the Dayton Daily News reports. Since October, State Farm has become a $1.2 billion bank. But it raises the question of why someone would turn to an insurance company for, say, a mortgage loan. According to State Farm, being the biggest homeowner insurance company is a good place for someone to start looking for a mortgage. Future advertising campaigns, State Farm hopes, will make consumers aware of the fact. According to one industry expert, when State Farm gets to the point where it offers retail bank products through all of its agents in the country, it will become one of the largest financial services companies in the U.S., without laying a single brick.

New Research To Be Unveiled at ACLI Symposium

The last four years have been a learning experience for banks that sell life insurance and annuities. While there has been a deluge of anecdotal advice on the subject, what banks need is clear research that details what methods and channels have been most successful and which have failed.  According to Carmen Effron, founder and President of CF Effron Company LLC, in 1998, quoting the 2001 ABIA Study of Leading Banks in Insurance,  $31.1 billion in life and casualty premiums went through banks. In 1999 that number rose to $36.7 billion and in 2000 it jumped to $. $44.9 billion.  That’s a compound annual growth rate of 17 percent. “The growth has been steady, but not explosive,” Carmen Effron says. Carmen Effron, a recognized leader in the bank insurance industry, will discuss both her original qualitative research completed in 2001 with a number of bank executives and, in collaboration with Reagan Consulting, quantitative research compiled by them over four years and which involved over 365 banks, at the American Council of Life Insurers Symposium, Bank Insurance: Threat or Opportunity? The symposium, March 7 at the Ronald Reagan International Trade Center in Washington, D.C., is the premier, executive-level meeting on the business and political impact of banks selling insurance and insurance companies entering banking. In the roundtable presentation, “The Good, the Bad and the Ugly; Selling Bank Insurance Today,” Carmen Effron, who served as President of BankBoston Insurance Agency and CEO of BankBoston Executive Benefits prior to founding her company, will discuss what the new research indicates as the preferred approach to selling bank insurance today and how it has changed over the last four years, how banks are using the Internet to distribute insurance, and the success factors for insurance companies looking for a bank partnership. To find out how to attend Bank Insurance: Threat or Opportunity?, please visit http://www.acli.com/public/about/meetings/fss/bankinsurmain.htm

Insurers Should Follow Lead of Other Financial Services Segments

New front-office CRM technologies can now allow insurance firms to cut costs and to stimulate their businesses by refocusing from individual lines of business onto customer retention, Meridien Research reports. The historically conservative insurance industry, with multiple disparate legacy systems and a policy-based sales structure, Meridien reports, must follow the lead of other financial services segments by better meeting the needs of their customers through integration, personalization, and heightened service. Since much of the industry’s existing software was built to support specific lines of business, a shift in focus required that all applications be re-written to newer standards. The cost and risks of updating an organization’s software all at once to achieve integration has been prohibitive. “Emerging web-based and component technologies for CRM are beginning to help insurance companies integrate their offerings,” says Stephen Ross, Analyst at Meridien Research. “Insurance agents, supported by these new technologies, hold the key to converting single business line policyholders into enriched multi-product customer relationships.”

Insurance Experts Come Togther at Symposium

Insurance companies can expect major benefits from selling insurance programs to banks—but those benefits don’t come without challenges. According to Robert Ireland, Vice President - Life Marketing for Swiss Re, first and foremost among those challenges is to show banks that they can make a profit by including insurance as a core banking product.  “Banks say that insurance doesn’t provide reasonable profits,” Ireland continues,  “But as long as banks don’t see it as a meaningful product line it’s not given the chance to become profitable.” To counter this, Ireland suggests that insurers run a financial model that shows a bank that their return on investment will be more than sufficient.  What other challenges, threats and opportunities does the insurance industry face? Insurers now have a place to discuss these questions with the top experts in the industry. Join key executives, such as Robert Ireland, a member of the American Council of Life Insurers Bank Insurance Steering Committee, at Bank Insurance: Threat or Opportunity, March 7 at the Ronald Reagan International Trade Center in Washington, D.C.  The symposium is the premier, executive-level meeting on the business and political impact of banks distributing insurance and insurance companies entering banking. To learn more about attending Bank Insurance: Threat or Opportunity?, please visit  http://www.acli.com/public/about/meetings/fss/bankinsurmain.htm

One Rep at a Time

To Kenny Howell, product implementation manager for Financial Institution Distributors Inc., the unit of Nationwide Financial that sells annuity and life insurance products through banks, selling bank reps on life insurance is a bit like preaching, The American Banker reports. While Nationwide had $45 million of life insurance sales through banks last year, the company understands that it has to continue to strive to make the product less complex for bank reps to jump on board. To reach that aim with its life insurance products, Nationwide is conducting more one-on-one training with bank-reps, instead of the group training that occurred with annuities, the article reports. To be successful, Nationwide believes it must convince bank reps that third-party firms handle much of the bank sales work that revolves around medical questions. Nationwide believes sales will rise once bank reps learn that they are not involved in the medical aspects of the sale.

Banner Year for Life Insurers' Mortgage Lending

Life insurers are expecting to increase their mortgage lending this year, but large loans on high-profile properties may cease as a result of the difficulties property owners face in obtaining insurance coverage, the American Council of Life Insurers reports.  ACLI's Mortgage Outlook 2002, which provides the results of a survey of 23 active commercial mortgage lenders in the life insurance industry—about 70 percent of the total industry market—reports that several companies have stated that they are already restricting some lending and are reviewing their allocation into some high profile metropolitan areas such as Washington, D.C.  "This could be a banner year. We forecast an eight percent increase in lending over last year. But large loans on trophy properties will dry up if Congress fails to provide a backstop for property/casualty terrorism insurance coverage," says Jack Nowakowski, ACLI manager, investment publications.  If projections hold up, the survey group's investing will top $29 billion this year, up from about $27 billion last year - an industry record. In all, life insurers' holdings in commercial mortgage loans will likely total $230 billion at year's end, up from an estimated $216 billion in 2001.

We hope you found information to help you keep abreast of the fast-paced financial services industry in this issue of the American Council of Life Insurers' Financial Services News Update—2002. Detailed analysis on the above trends and news can be found at ACLI's Financial Security Solutions Symposium—Bank Insurance: Threat or Opportunity, March 7, 2002, at the Ronald Reagan International Trade Center, Washington, D.C. If you'd like more information on this or any of ACLI's many other conferences, please visit our web site's Conferences and Meetings Page or phone 202.624.2404 or email aclimeetings@acli.com.

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