SMALL BUSINESS: THE NEXT BIG THING FOR BANKS
by Valerie Jordan
Bank insurance programs, created with various degrees of complexity, are currently experiencing high activity due to the banks' need to find new ways to increase their revenues by meeting all the financial needs of their customers. Valerie Jordan discusses how insurance offerings allow banks to become full financial services providers for small business customers.
Bank insurance programs range from basic one-product offerings to full-service financial planning, with products from annuities through Homeowners to Auto coverage, and on to Life insurance and Long-Term Care. The sales representatives also come in all shapes and sizes: Registered financial consultants, platform insurance-licensed bank personnel, P/C agents, and insurance specialists.
Marketing media include the Internet, call centers, and direct response initiatives. Platform, private banking, and trust departments are all being tapped for insurance sales. The next segment of bank insurance customers is emerging from this highly charged environment. This segment — small business and commercial customers — provides a unique way to combine an array of P/C products and services with those from the Life side to fashion a single enterprise solution.
MARKET POTENTIAL
There are approximately 25 million small businesses in the United States, which represent 99% of all employers. They employ more than 53% of the private work force, with a total payroll topping $1 trillion. These firms usually have 10 to 50 employees, are privately held/family owned, and represent up to $25 million in sales. The key point to remember is that although many of these firms do not have an insurance agent; all of them use a bank. What a prospecting gold mine for a bank insurance agency!
THE OPPORTUNITY
A bank insurance agency can offer a single enterprise solution to the owners and employees of small businesses through three different sales initiatives. First, by using employee benefit programs (group and voluntary), an employer/owner can customize a suite of products targeting their non-insured or under-insured employees. Second, the owner can offer benefit programs aimed at their key personnel, boards of directors, and, most importantly, themselves. Third, these programs can be tied to such bank offerings as savings accounts, checking accounts, and payroll deduction services.
THE CHALLENGE
Unlike one-on-one sales by platform salespeople to bank customers, these small business/commercial sales present three challenges. The first is selling the new business development officer, bank branch manager, or upscale bank personnel on the benefits of offering their customers an insurance program. The second is convincing the employer/owner to buy into the program. The third is selling to the individual employees.
WHAT PRODUCTS TO OFFER
To illustrate the multiple sales opportunities, let's review the three tiers of this insurance sales pyramid.
The bottom tier illustrates voluntary benefits/worksite products that an owner/employer can offer their employees. Each employee has an opportunity to buy individual products and pay for them conveniently through their employer and the bank. These products include Life insurance, Long-Term Care, IRAs, Auto, Homeowners, and such bank products as loans and mortgages. The cost to the employer is zero; the employee selects and pays for these benefits individually.
The middle tier illustrates the group employee benefits — Life, Health, and retirement —and raises the question of which types of benefits to provide at what cost to the company .
The upper tier illustrates products and services targeted at the owners, key employees, and board members. These products and services address advanced sales concepts: Buy/sell, deferred compensation, and key-person coverage.
HOW DOES IT WORK?
A team approach is the best method to present an enterprise insurance solution to the small business/commercial customer. The team consists of a banker, a P/C agent, and a Life agent. The banker sets the stage by introducing the concept to their small business/commercial customer. This banker can be the new business development officer, the branch manager, or someone from the bank's Commercial area.
Once the initial approach is made and the clients' needs are defined, the P/C or Life agent steps in. The P/C agent accesses both Commercial coverages and individual Home and Auto products for the individual employees. The Life agent packages a suite of products focused on the owner/employer, key executives, and other employees.
The bank can use its Web site or Intranet to support sales and administration, facilitate enrollment in the voluntary benefits program, or purchase individual insurance coverage. To further support electronic sales, the agency's call center provides the personal touch by offering more product information to employees and ongoing service support to both the employees and the employer.
The bottom line: These insurance offerings allow the bank to become a full financial services provider for its small business customers. This holistic approach ties the firms more closely to the bank, increases its assets under management, and provides needed benefits to its customers.
Valerie Jordan is president of Jordan & Jordan Associates, a consulting services company in Belchertown, MA. You can reach her at [email protected] or by visiting www.jordanandjordan.com.