If Lee Gaudette, a third-generation independent agent based in Worcester, Mass., had a nickel for all the good reasons he doesn't sell banking products to his customers, he could probably open his own bank.Gaudette's sentiments are motivated by several factors, among them tradition, geography and competition. That's why Gaudette uses Insurebanc, a Farmington, Conn.-based federal savings bank established jointly by the Independent Insurance Agents & Brokers of America (IIABA) and W.R. Berkley Corp., for his own cash management purposes and for various loan products.

When Insurebanc debuted in 2001, the core function of its existence was to empower agents to generate bank business with their customers. In return, agents would receive a referral fee from Insurebanc, which conducts business on a national basis and is authorized to pay referral fees to agents in 18 states for all products and for services in six.

However, Insurbanc has switched gears and today emphasizes products and services intended for agents as end users. Insurebanc might emphasize agent referrals in the future, but for now, the 300-plus agencies that have signed up "are not focused on this line of business in the current hard market environment," says William Weaver, executive vice president and CFO for Insurbanc, which more than doubled in size in its second year to $26 million in deposits and $40 million in assets.

"We do believe that interest in, and more importantly, execution of marketing to agency referrals will pick up, but probably not much before the insurance market has softened for two to four quarters. We will be ready and expect our referral volume to substantially increase when that condition occurs."

Along with agency financing products and services, Insur-banc puts a wide array of consumer banking products at the disposal of agents and brokers and their clients, including consumer loans, credit cards, home equity loans, mortgages, certificates of deposit and money-market accounts. For business clients, the bank offers working capital lines of credit, commercial term loans, commercial real estate loans and cash management services.

It's not only the breadth of products that are available that appeals to agents, it's the manner in which they are delivered. "Generally, we find that the industry is underserved by lending institutions, on the local level as well as regionally," says Weaver. "Local banks basically evaluate commercial borrowers based upon the average deposit relationship or the liquidation value of assets pledged. The basic problem is that local and regional banks, as well as loan brokers, do not understand the business value of an agent's book of business."

Gaudette is among the agents who don't view the referral aspect of Insurbanc as an asset to his business, a mid-size agency that sells property/casualty insurance. "It's not meaningful for me to sell bank products. Most of my customers have established that business through banks, and are not interested in switching over," says Gaudette, adding that his insurance customers are traditional.

Gaudette adds that there are other hurdles that don't make it worth his while to consider selling loans, credit cards and deposit products.

"There are stiff licensing provisions to sell mortgages in Massachusetts," he explains. "You have to be in the mortgage business a long time to succeed." And, invading the turf of local banks could start a possible competition war with community banks-which might be inclined to sell insurance to his own customers, Gaudette adds.

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