Insurance companies, banks and brokerages are all proceeding aggressively with their strategies to move into each others' territories and provide more financial products to their customers. Between Jan. 1, 1997 and Nov. 30, 2000, 45 insurers had filed for thrift charters with the Office of Thrift Supervision (OTS). And banks are gobbling up insurance agencies at a rapid rate.

Although financial convergence is in full force, the jury is still out on how many-and how quickly- traditional property & casualty insurance agents will take on the broader role of financial advisor.

In 1999, 42% of members surveyed by the National Association of Professional Insurance Agents (PIA) were already engaged in life and health and financial services, and 91% planned on expanding into these lines in the next three years, says Patricia Borowski, division vice president of the Alexandria, Va.-based association.

"If an agency is going to be actively engaged in this business for more than eight years, we find that they intend to be a full-service financial services marketing entity," she says.

To compete in the larger financial services arena, large carriers are also changing the role of their agents-to sell more than just property & casualty insurance.

Timing is right

Allstate Insurance Co., for example, by January had trained and licensed 3,000 of its 13,000 exclusive insurance agents to sell annuities, variable products and mutual funds, renaming them "personal financial representatives."

And nearly 10,000 of State Farm Mutual Insurance Co.'s 16,500 captive agents nationwide are registered to sell securities. As of January, 96% of the "good neighbors" in 11 states were selling State Farm bank products, and agents nationwide will begin selling State Farm mutual funds in the first half of this year.

Professional associations, such as the Independent Insurance Agents of America (IIAA) and the National Association of Mutual Insurance Cos. (NAMIC), are also adapting themselves to financial convergence. Both have received thrift charters from the OTS to provide independent agents with banking products to sell to their clients.

"With Gramm-Leach-Bliley enacted last year and with the consolidation of banks, brokerages and insurance, our timing is good right now," says Mike Herlihy, president of InsurBanc, recently established by Alexandria, Va.-based IIAA. "It's clearly a natural progression for independent agents to look to expand their book of business into products beyond what they've traditionally dealt with."

Not so certain

Others industry observers aren't so certain that the majority of insurance agents will easily take on a broader role.

"The opportunity is favorable and there will be some agencies that will be able to take advantage of it. But I suspect, for the majority of agencies, this won't be something that will fit into their business plan," says James Luscombe, a consultant specializing in agency distribution with New York-based PricewaterhouseCoopers.

Larger agencies that can develop alliances with financial institutions and devote resources to different products and new technologies that support real-time processing of loans, for example, will be better equipped to take advantage of financial services convergence, Luscombe says.

Whether or not an agency will transform itself from insurance to financial services depends in part upon where the agency is in its life cycle, says Brad Henthorn, financial consultant with The Henthorn Agency in Beech Grove, Ind.

"If the principal is about to retire, I don't think they're going to run out and do these things. But if there's new blood in the agency, then they're going to have to look around and find out where 'the cheese' is," he says, referring to the New York Times best seller about adapting to change, "Who Moved My Cheese?"

Some agents have done quite well at cross-selling life products and other agents haven't moved in that direction, says Paul Equale, president of IIAA. In addition, he says, some agents are organized to be employee benefit consultants and others sell crop insurance.

"There's a broad array of sub-insurance businesses that independent insurance agents participate in," he says. "So I certainly would not say that the average small agent in rural America who wants to stick to their knitting and basically be an insurance agent has to worry."

Agents' option

As financial services convergence takes place, insurance agents will experience rising competitive pressure-local banks selling insurance and other agencies in their neighborhood offering more or different products.

Nonetheless, independent agents in particular have a lot of choice in deciding whether or not-and how-they want to expand their businesses.

"I can't write a memo and mandate what my agents sell, because they're independent agents," says Dave Fronek, president of Indianapolis-based NAMIC's Assurance Partners Bank.

"We try to sell our products and services and the concept of the bank to them," he says. "They are our foremost customer since they represent our key distribution system. So they really have to want to participate in the bank. We can't force them."

Currently, captive agents working for Nationwide, State Farm, and Allstate also have the option of selling financial products. Columbus, Ohio-based Nationwide Insurance Cos., for example, has been selling mutual funds since 1951.

About 90% of the carrier's 4,200 captive agents are licensed to sell traditional life insurance, variable products, fixed annuities and mutual funds-in addition to selling property & casualty insurance.

However, "some choose just to be P&C agents," says Michael Kirk, vice president, agency financial sales, at Nationwide Financial. "It's the 80/20 rule: About 20% of our agents do 80% of the (life, annuity, and mutual fund) business."

Some agents will become financial advisors, says Rod Guilmette, spokesperson for the National Association of Professional Allstate Agents (NAPAA), Canton, Mich. "But I don't think the average agent will do this."

Most agents will become aware of other lines of business and perhaps refer their customers to a specialist or have a specialist on staff to attend those needs, he says. Insurance agents "don't want to be responsible for the investments and financial security of their customers," he says. "That being said," he adds, "the agent may not have a choice. Companies have ways to force compliance with their wishes."

Bigger plans

When Allstate Life Group of Cos. changed its name in November to Allstate Financial to coincide with its expansion from traditional life insurance products into savings and investment products, Allstate agents were asked to take on the broader role of "personal financial representatives." The Northbrook, Ill.- based company expects that half of Allstate's existing agents will elect to become PFRs by 2002. All new agents, however, will be required to take on the broader role.

"Can we adjust (the agents') thought process to be providers of those financial services to the Allstate customer base? We certainly think we can," says Pete Maude, vice president, Allstate Financial Services.

The carrier is targeting middle-income Americans for financial services. "The industry as a whole has been concentrating on upper-end, higher income, higher net-worth individuals," Maude says. "There seems to be somewhat of a neglect for middle-income America. We feel that's a significant part of our customer base and we have the opportunity to provide financial services to them."

Best of Both Worlds

State Farm is also serious about becoming a leading "one-stop shop" financial services provider to its customers. And its agents will play an important role in making that strategy successful.

"We're encouraging our agents to become certified financial planners," says Bob Trippel, vice president-agency at the Bloomington, Ill.-based carrier.

The company has set a goal for 10% of its agents to take certified financial planning courses- although the company has not set a deadline.

For the time being, however, State Farm agents are able to select how involved they want to be in selling State Farm's bank and financial products. An agent can open a savings or checking account for a customer, for example, or refer that customer to the call center. "They have the best of both worlds," Trippel says.

Beth Cadwalader, a Chicago-area State Farm agent, sees her business moving into financial planning over the next five years. Consequently, she's considering becoming a certified financial planner.

"I don't know if it's something I'd do in the next year, but maybe in the next two or three years- because there's a big time commitment," she says. "We do a lot of continuing education already for insurance," she says. "If the CFP courses cover my credits (toward insurance continuing education), I'll probably do it sooner than later."

Training And Certification

Already, Cadwalader has completed the State Farm training to sell banking products, which involved six to eight hours of computer-based self-study, as well as two days in a classroom. The curriculum covers State Farm bank products, software training, sales concepts and strategies, and compliance issues. Cadwalader has also received the National Association of Securities Dealers (NASD) Series 6 and Series 63 licenses required to sell variable contracts and investment products. In February, she's taking the mutual fund training, which consists of five Web-based courses and a day-long interactive distance learning session.

"We're equipping all our field offices with interactive distance learning capacity," says State Farm's Trippel. "In order to roll the country out as fast as we plan, we've got to go to a distance learning approach instead of face-to-face in the classroom."

The training Cadwalader has received is typical for agents who are moving into financial services. Allstate agents studying to be personal financial representatives go through a similar program, and Nationwide regularly trains its agents who sell financial products to ensure they are informed of regulatory changes.

"Compliance is a big issue today-more so than ever before," says Nationwide's Kirk. The continuous education that agents receive involves much more than product training, he says.

Because of the complexity of regulations, traditional insurance agents will not transform into "be-all" financial services advisors, NAPAA's Guilmette believes. "The business of insurance itself is changing so much, not just policies-but the laws and rules. An agent has enough difficulty just keeping up with that, never mind trying to be a jack-of-all-trades."

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