In 2015, life insurance sales reported in the bank channel* for the year were down 19 percent compared with 2014. A key factor was reduced sales of one of the largest product lines in the bank channel. Universal Life with a Lifetime Guarantee policies offered through banks have been in decline due mainly to low interest rates and low investment returns. In addition, most of these policies are sold as single premium, which are also more sensitive to low-interest rate environments.
Apart from life insurance sales, banks also struggle with growing their business because of the transactional relationship most customers have with them. Recent LIMRA research found that while people express “loyalty” to their bank, 7 in 10 use it only to deposit their paycheck and pay bills.
On the “glass half-full” side, a LIMRA survey of bank investment and insurance executives found optimism for the future as 61 percent of respondents believe consumers will look more to banks and credit unions for insurance. Despite the overall decline in bank life insurance sales, recurring premium sales increased from $40 million in 2014 to $49 million in 2015. A recurring premium means more frequent customer contact as opposed to the "one and done" nature of a single premium purchase.
The best reason for banks to be optimistic may depend on how effectively they grow their base of Millennial customers. LIMRA bank research shows:
• Millennials hold more of their savings/investments at banks or credit unions than other groups
• More than 60 percent say it’s very important to have all their financial needs met in one place
• They are less likely to have a relationship with a life insurance agent or other financial advisor
Millennials are also less likely to have preconceived notions about who offers what financial products and services, as 4 in 10 said they would consider a financial plan through their bank. (Chart)
LIMRA Secure Retirement Institute research shows that nearly 3 in 4 clients who have a formal financial plan tend to buy the additional insurance and investment products suggested by the plan. Advisors who offer to review their clients’ insurance coverage can effectively move the conversation from financial planning to life insurance.
So, despite the recent decline in sales, banks have real opportunities going forward.
*- Some sales occur at the bank level, but since they are placed through a broker are reported in the brokerage general agency (BGA) channel.