by Jim Campbell, September 2004

National Underwriter

For years, you watched from a distance as the fledgling bank-insurance industry struggled to gain flight.  You wondered if it would soar or come crashing to the ground.  And you may have assumed or even hoped for the latter.  But in recent years it has become clear that banks are in the insurance business for the long-haul.  Yes, some banks have struggled and some have shied away, but others have proved that banks can succeed in the insurance distribution business.  In fact, many bank-owned agencies now rank among the leaders in size, growth, profitability and any other metric you care to use to gauge agency performance.  And for many agency principals, life after merging with a bank is pretty good.  Sometimes even better than before.

So, now it's your turn.  After years of fielding and casually dismissing what seemed like a continuous stream of calls from interested banks, you've started to reconsider.  Maybe it's time to take the plunge.  After all, the insurance markets are softening, the bank-insurance business is maturing and the inevitable challenge of perpetuation is looming.

If this scenario sounds at least vaguely familiar, you're not alone.  Agency principals across the country are reconsidering their position on bank-insurance.  And many who swore they would never sell to a bank are currently in the process of doing so.  But if banks are now considered desirable acquirers, new questions must be addressed.  Most importantly, how do you ensure that your experience will be included among the bank-insurance success stories?

Well, there are no magic formulas and no one can guarantee success.  But there are lessons to be learned from those who have gone before you.  In fact, if you look carefully at the approach taken by successful bank-owned agencies, you will find a compelling pattern.  How have these agencies distinguished themselves from their less successful peers?  In part, by consistently doing well the following three things:

1. Relentlessly Clarifying Post-transaction Expectations.  Seriously!  No token efforts will suffice.  The top bank-owned agencies take a "make no excuses" and "leave no margin for error" approach to expectations setting.  Failure here is the greatest risk you and the bank face.  Too often, well-intentioned parties, on both sides of the transaction, fail to define a clear, shared vision for the future.  The time for clarification is not after months of frustration and disappointment, but before the deal is done.  Key questions to address pre-closing include:  How will your role change after the deal?; Will compensation structures change for agency employees?; Will the agency be responsible for future acquisitions?; How much cross-selling into the bank customer base is expected?; Which products and bank locations will the agency be expected to support for cross-sales?  And many more.   In short, the top bank-owned agencies eliminate any room for ambiguity before they close the deal.
2. Becoming the Insurance Ambassador.   Like the dog that catches the car, some banks that buy agencies aren't quite sure what to do next.  Show them.  Take the lead.  Become the insurance ambassador within the bank.  What does it mean to be the insurance ambassador?  Well, first, it means building relationships.  Principals and employees of leading bank-owned agencies aggressively pursue relationships within the bank.  Simply stated, your ability to sell insurance to bank customers is dependent upon one thing:   building personal relationships within the bank.    But don't expect the bankers to pursue you.  Consider it your responsibility to pursue, communicate and educate.  What does a desirable insurance prospect look like?  How can we work together to sell to them?  How will the bank customers benefit?  Credible answers to these questions are the keys that gain you access to the bank's customer base.  But it's not enough to just build relationships.  The second responsibility of the insurance ambassador is to shepherd the agency within the culture, operations and leadership of the bank.  Remember, in most cases, the bank executives are new to agency management.  While they will look to you for the day-to-day management of the agency, they will want to engage with you in higher level strategic and financial leadership issues.  What is the example set by the leaders of high-performing bank-owned agencies?  Invest heavily, especially in the early years, in guiding the bank leadership through this learning curve.  And along the way, as the bank learns the subtle art of agency management, be prepared to insulate the agency and its employees from a clumsy mistake or two.
3. Keeping the Main Thing the Main Thing.  What's the main thing?  For your agency, the main thing is the business you currently serve, the channels of new production you currently cultivate and the talented men and women you currently employ.  Sure, the opportunity to cross-sell into the bank's rich customer base is seductive.  But here's the reality.  Five years after the deal with the bank is closed, 90% or more of your revenues and earnings will come from business other than bank cross-sales.  The cross-sales are great and they will help you grow bigger and faster than you can on your own.  But, for the foreseeable future, they will contribute only marginally to the overall value of the agency.  So, don't lose focus.  Incorporate cross-selling into the strategy and operations of the agency, but don't compromise your existing sales and service strategies to do so.

If you're among the agency principals currently considering a sale to a bank, congratulations.  Banks have proved they can be an excellent strategic partner for agencies.  And they can provide a path for you to achieve your goal, be it to grow, acquire, perpetuate or all of the above.  But, in order to make the most of this journey, heed the lessons learned from those who have successfully gone ahead.  Relentlessly clarify expectations, become the insurance ambassador within the bank and keep the main thing the main thing.   And enjoy the adventure along the way.

James M. 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 that serves the insurance distribution system.