Like manufacturers seeking multiple distribution avenues, many life insurance companies have been looking for further sales channels. The bank channel, for one, has been gaining traction.

Joan Cleveland, a senior vice president of business development at Prudential Financial's individual life insurance division, said that, since the Newark, N.J., company started selling life insurance through banks a little more than a year ago, it has focused on middle-market consumers who have "really been underserved by the life insurance industry."

To make its life insurance products consumer-friendly and bank channel-friendly, Prudential created a simple product designed to be easy to sell. This term insurance product is less expensive and provides a death benefit for a specific period: 10, 20 or 30 years. Prudential, like other life insurance companies that sell through banks, also streamlined the process, making application forms shorter, bringing the application process online and offering real-time underwriting.

Prudential has kept the bank channel from competing with its sales agents by differentiating the products the two sell. The life insurance sold through banks is only available up to $250,000 and is "priced for convenience," Cleveland said. At that price no in-depth needs analysis, such as customers would get if they met with a Prudential sales agent, is conducted.

"It's a different product and a different customer base," she said. "The customer is a little bit younger than general Prudential life insurance policyholders, and they are on a budget, so they are buying a slightly smaller amount of coverage."

New York Life Insurance Co., on the other hand, has eschewed the "more-is-better" sales strategy, avoiding the bank channel altogether, though it means giving up potential revenue. The company has made a strategic decision that its career agents are its strength, and how it provides value.

Mark Pfaff, the EVP in charge of U.S. life insurance and agency sales at New York Life, would not concede that the company's avoidance of the bank channel is a "missed opportunity." But Ken Kehrer, the founder of financial services and research company Kehrer-Limra, is not so sure.

"Presumably, they are forgoing sales," Kehrer said. "And banks are better positioned than agents these days to capture middle-market-customer life insurance sales. Life insurance agents are focusing more and more, at the larger insurance companies, on selling life insurance to wealthier people and business owners, leaving people like you and me out of the picture."

Last week, Kehrer-Limra released its Bank Life Sales Report for the third quarter, which showed flat total individual life sales nationally in the quarter and sales down 11% in the year's first nine months, compared to the year-earlier periods. Yet banks raked in 59% more in new life insurance premiums in the quarter, bringing their life sales growth to 32% for the first nine months.

Bank-sales gains in percentage terms can appear outsized because they start from a smaller base; bank sales make up only 2% of overall life insurance sales.

Pfaff noted that New York Life's career agents had a strong year too, with new sales up 23% compared to a year earlier.

He also said that the type of life insurance sales made through banks is different. The more profitable sale is the recurring premium, in which the customer buys a policy and pays the same premium year after year. The other type is the single-premium product, which calls for payment of a lump sum.
About 90% of sales through the bank channel are of single-premium products, Kehrer said.

Nonetheless, Kehrer said he believes dependence on sales agents poses challenges: The number of life insurance agents is shrinking, and the ones who remain are getting older. The solution, he said, is to find alternative distribution channels as companies have done by selling through banks, stock brokerages, on the Internet and through workplace marketing.

"New York Life is paying much less attention than other companies," Kehrer said. "They are a very successful company, but could they also do more by having more middle-market sales? Probably."

"In the long run, if the agent sales force is shrinking, the population is growing and we tend to get wealthier every year, it seems like you are missing opportunities if you stick with a shrinking distribution force," he said. "It doesn't mean you can't be successful at it, but the question is: Would you be more successful if you did both?"

This story has been reprinted with permission from American Banker.

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