by Jim Campbell, October 2005

National Underwriter

Last month, at the annual conference for the American Bankers Insurance Association, two banks received the ABIA Leading Bank Award.  S&T Bancorp in Pennsylvania and Webster Financial Corporation in Connecticut were both recognized as leaders among banks in the commercial insurance business.

S&T and Webster have been consistent high-performers in commercial insurance, though they have not always followed the same playbook.  They have succeeded not because of their differences but because of their common ground.  They, like other high-achieving banks in commercial insurance, have surpassed their peers in large part because of critical decisions made in a few key areas.  Following are three key decision points that separate the leaders from the rest of the pack.

1. Start with the Right Agency Leader

Many of the leading banks have predicated their entry into commercial insurance upon finding the right agency leader.  They have passed on acquisition candidates that lacked the right leadership profile, and pulled the trigger on a deal only after months of “courting”.  To other banks, they may seem a bit particular.  But their diligence has been rewarded.

Usually, the agency leader arrives via acquisition.  But don’t assume any effective agency leader will be an effective bank-owned agency leader.  Within the bank, the agency leader will operate along an unfamiliar dimension.  New challenges will present themselves.  The evidence suggests those best equipped to deal with these new challenges are leaders possessing certain essential qualities.

So what qualities should you look for?  First on the list is trust.  The trust and respect of the agency employees is a non-negotiable. Without it the leader will fail to disarm the internal skeptics who will inevitably emerge.  Second is an ambassador capacity.  For the agency to succeed, the leader will have to forge strategic relationships with other senior bank executives.  If the two organizations fail to connect at the top, they won’t connect at any level.  And a third essential quality is the capacity for understanding more complex organizational issues, in order to effectively leverage the bank’s infrastructure.  For example, an agency may become stronger and more competitive if its leader recognizes and embraces the core strengths of the bank, such as its planning process, its human resources capabilities or its technology.

2. Preserve the Agency

For some banks that have acquired agencies, integration is a severe exercise.  One focused more on conforming than preserving.  But the leaders see it differently.  They have respect for the inherent differences between insurance and banking, and believe these differences should be preserved.  They approach their acquired agencies with caution.  Job one is preservation of the core competencies, the culture and the operational autonomy of their insurance partner.  Integration is an intricate dance, and not a heavy-handed transformation.

In order to ensure the preservation of the agency, many of these banks have made two key decisions.  First, they established the agency as a distinct business line, not folded under or subordinated to an existing line.  Second, they established the agency leader as a senior bank executive. 

Often within these leading banks, insurance is one of only four or five recognized business lines.  Initially it may seem out of proportion.  Insurance, with its relatively anemic economic impact, side-by-side with mature giants like commercial lending and retail banking.  But the arrangement speaks more of future expectations than current realities.  It suggests a long-term commitment to the commercial insurance business.  And it provides the agency president with a seat at the bank’s leadership table.  Ultimately, that seat enables the agency president to build key peer-relationships with other senior bank executives, and to engage them in a high-paced knowledge transfer.

3.  Innovate to Cross-Sell

When the topic turns to cross-selling commercial insurance products to the bank’s customers, many bank executives are left scratching their heads.  The default position is to offer up some combination of cross-sales goals, referral quotas and incentives.  The leaders have chosen instead to innovate.

Some leaders, like S&T, have refused to saddle their commercial lenders with cross-sales referral quotas.  Instead, they have reversed the process.  Within these banks, the agency works proactively to identify key areas of interest for its primary carriers.  Armed with this information, producers approach lenders looking for opportunities that meet the carriers’ appetite.  This approach produces an effective alignment of the objectives of all four parties:  the customer, the carrier, the lender and the producer.  And for some, it has produced an exceptionally high written-to-quoted hit ratio on cross-sales.

Others, like Webster, have established multi-functional teams that work together to deliver more comprehensive financial solutions to shared customers.  Such a radical innovation can infuse the commercial insurance business directly into the culture of the bank.  But don’t expect it to be easy.  As with most broad-reaching change, skepticism and resistance will be powerful.  The only effective antidotes are persistence and sheer determination.

Conclusions

A glimpse inside a spectrum of high-achieving banks in commercial insurance reveals consistent decisions in a few key areas.  Like S&T and Webster, most have strong leaders.  Most have a philosophy of respect for their agency partners.  And most are finding innovative ways to cross-sell

Additionally, these banks have combined wise decision-making with fierce determination.  Most have a long-term perspective.  And most have an absolute, burn-the-ship conviction to succeed.  These banks are not dabblers, nor are they experimenters.  They have embraced the commercial insurance business as beneficial to their customers, their shareholders and their employees.  And they have become leaders.

Jim Campbell is a principal and senior vice president of Reagan Consulting, Inc., where he leads the firm’s bank consulting practice.  He may be reached at 404-233-5545, or at jim@reaganconsulting.com.  Reagan Consulting is an Atlanta-based financial and management consulting firm serving the insurance distribution system.

Copies of the 2005 ABIA Case Studies of Leading Banks in Commercial Insurance may be purchased from the ABIA at 202-663-5163.