Sending your customers to find other financial services providers?

We have discussed recent advances in technology- FinTech- specifically as it relates to the delivery of insurance products, in this space before. The insurance industry has changed forever. There are significantly fewer insurance agents across all lines and fewer new agents entering the business. Why? Insurance buyers of today and into the future buy insurance the way they buy everything else- on line. And third party technology companies and the insurance industry are accommodating them.

After several false starts of banks buying and managing retail insurance agencies in Michigan in the mid 1990’s when the insurance laws were changed to allow financial institutions to sell insurance products, our position has remained unchanged: insurance is essentially an unrelated business for banks and entry into the retail insurance business offers no greater advantage for success than almost any other industry. Banks buying and attempting to manage retail insurance agencies has not proven to be a winning strategy. While we spent much time in the 1990s helping banks buy agencies, most of our efforts in M&A in this area has been helping banks sell agencies.

This being said, insurance does relate to many core banking activities, primarily lending. The use of insurance to support community banks core business models can provide significant benefits- improved customer experience and development of recurring noninterest revenue.

There has been almost frenetic activity across financial services industries in the past year and a half focused on vertical integration into related insurance services. The goal? Improve the customer experience- and not give customers a reason to seek related insurance from another financial services provider who will sell them THEIR core product.

Technology and changes in business models in the insurance industry have fostered new, innovative platforms that directly support two material areas of community bank core business: Small commercial and mortgage lending and senior markets.

A prominent provider of internet based platforms for life and related products just launched the first individual term life insurance product that is truly designed for loans. The customer is able to buy the exact amount of insurance to pay off the loan- not more and not less as is the case currently. The product target is mortgage lending and SBA loans which typically requires life insurance.

We expect, early Q 2, for the launch of the first internet based platform to deliver, end to end, small commercial property and casualty coverage (BOP). Being able to assist commercial customers at point of loan closing has been a goal of many banks over a long period of time.

Also in Q 2 we expect the launch of an internet based platform to offer an array of senior products including Medicare parts c and d, supplement plans and final expense. The customer will be able to pull quotes from multiple companies, learn from educational tools and access senior insurance product specialists. The customer demographic in most community banks tends older and they are buying senior products from somewhere.

All of these internet platforms are able to be white labeled, bank branded and added to the bank website for access.

Adding insurance products to support key bank areas puts community banks in line with other sectors of financial services industries. Mortgage servicers, title companies, investment firms, big box stores and credit unions have moved very quickly to vertically integrate insurance into core product offerings. Customers are growing to expect- and soon to demand- related insurance products to be an integral part of their financial services transactions.

The good news? Technology has made it possible for banks to add these services at minimal cost and without having to license bank employees and divert their attention from core bank responsibilities.

To learn more about the rapid transformation of the financial services industry and what opportunities might fit the strategic plans of your bank, call Jim Harvin at 517.351.4158 or jharvin@jlhassociatesllc.co for more details.