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Team sales spur bank’s insurance success
Like the lyrics to the Beatles’ song, “Can’t buy me love,” money isn’t the thing that drives cooperation between First United Insurance Group and First United Bank & Trust, Oakland, Md. The insurance unit does not pay individual referral fees for insurance leads but instead relies on a series of sales teams to coordinate efforts to serve customers most effectively and broaden the bank’s relationship with each customer.
Val Teagarden, formerly head of marketing and cash management for $1.6 billion-assets First United and now president and CEO of the insurance group, set up the team approach about five years ago. There are now seven teams, each comprising specialists from commercial, retail, trust and investments, mortgage, cash management, and insurance from within a geographic area. A member of the bank’s “coaching staff,” as its executive management team is known, also sits in on team meetings.
Each month, the groups meet to review the current business of what the bank calls “COBO” customers—community oriented business owners. These are businesses and individuals that are very involved in the communities they operate in.
Before adjourning, the teams set a plan to meet with one or more customers, based on what was discussed. A business insurance client may have a need for cash management services, or for a personal mortgage, for example. Whichever specialist made the initial contact is the lead person for that client.
Having a banker as translator
First United, situated “as far west as you can go” in Maryland, has 26 offices in Maryland and West Virginia. It got into the insurance business in 1999 with the acquisition of the Gonder Agency. Since then it has acquired five other agencies. Each agency retains its original name in addition to the bank’s name—e.g. First United Insurance Group/Gonder Insurance. The bank wanted to keep the connection to the original agency, says Teagarden, in part because it has insurance offices in communities where the bank is not known.
The agencies all sell both personal and commercial lines. Teagarden says commercial lines are the most profitable, both property and casualty and group health. The Insurance Group has seven locations—some in the same towns as bank branches, but none of them in the same building—and it has 32 employees (FTE).
The bank began selling insurance, she says, for the same reasons many banks do: to meet the needs of customers, deepen customer relationships, and generate fee income. Insurance revenue has grown steadily from $500,000 in 1999 to a projected $3 million this year. At that level the contribution to noninterest income generated by the insurance group is projected to be 12% this year, putting the bank in the upper category of that measure of performance.
Among banks that got into insurance by acquiring an agency, opinions vary as to whether it’s better to have the insurance unit run by an insurance person or by a banker. Teagarden, who became head of the insurance group in 2001, says being a banker is a big plus. “I’m a strong bridge between the cultures of the bank and the insurance agency,” she says.
Agencies typically have more aggressive producers (sales people) than banks, and tend to be more entrepreneurial, she says. Being part of a corporation is a much different culture, and having been in that environment, Teagarden can help agency people adjust. She also helps translate the peculiarities of the insurance business—such as the cyclical hard/soft market for premiums (currently soft), and what that means in terms of agency revenues (down).
Referrals without incentives
Cross-selling between banks and their insurance operations has been only modestly successful for most banks, according to Jim Campbell of Reagan Consulting, the author of the main article in this report. It’s hard to determine if First United’s efforts have been better than average in this regard because its current core processing system does not have the capability of tracking referrals, according to Teagarden. (A new system to be installed soon will allow that.) However, the teams have goals for each COBO customer, says Teagarden—for example: to increase the number of bank services used from two to four. This is tracked for each team and awards are given out at year end.
The bank has an incentive program based on overall company performance (net income/FTE), but does not pay individual insurance incentives for referrals within the teams or otherwise. Everyone in the bank, however, is required to make seven referrals a year to any part of the bank as part of their job. Insurance tends to get many of these, says Teagarden, because insurance is something everyone has to have.
Regarding the difference between commissioned insurance producers and salaried bank employees, Teagarden says it’s not an issue. “Everyone in the bank has the opportunity to do any job they qualify for. Because I came from the bank, I can explain the difference to people between being salaried and someone who works on an ‘eat what I hunt’ basis.” The latter is not something everyone wants. BJ
By Bill Streeter, editor-in-chief
The electronic version of this article available at: http://www.nxtbook.com/nxtbooks/sb/ababj0909/index.php?startid=36