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IS YOUR LOCAL AGENT COVERED FOR THIS?
Richard W. Bellemare has had a lot to worry about over the last few years. His Bristol (Conn.) business, Tracy-Driscoll Insurance, is just now recovering from the recession-driven slump in insurance policy sales. As president of the agency, he must also vie with three local Allstate Insurance Group agencies and national insurers such as Geico Corp.
Now Bellemare has a big new worry: banks. Shawmut National Corp., with $30.7 billion in assets, is taking direct aim at insurance agencies like Tracy-Driscoll. Shawmut bought an agency in Connecticut last fall, and plans to sell all manner of policies in its network of branches. "We've got plenty of competition already," complains Bellemare, reflecting the view of many other agents. "They should stay out of the insurance business."
TURF WAR. Not likely. Banks have been selling annuities like hotcakes, racking up $12 billion worth in 1992, fully 20% of all annuities sold. Now, in the wake of a U.S. district court decision last July authorizing national banks to sell insurance as agents from towns with fewer than 5,000 residents, Shawmut and other banks want to expand even further into agents' turf. Banks are buying agencies and gearing up to use them as a base to market products from auto to life insurance through their vast branch networks.
Banks don't yet appear ready to take on giants like Aetna Life & Casualty Co. by trying to get regulatory authority to underwrite insurance. But banks believe they can become successful agents by cutting overhead costs and selling policies as much as 30% cheaper than existing insurance agents. "The agencies see we have a competitive advantage as far as price," says Gunnar S. Overstrom Jr., Shawmut's president and chief operating officer.
The banks are moving quickly to exploit that advantage. After the district court allowed Portland-based U.S. National Bank of Oregon to go ahead with the purchase of an agency, other banks followed suit. Last October, Jacksonville-based Barnett Banks Inc., Florida's largest bank, bought the Linda Clifford Insurance Agency in tiny Belleview, Fla. Owensboro National Bank in Kentucky is trying to get authority to license its own agents. Shawmut bought Insurance Associates of New Haven Inc. last November, then moved its headquarters to Chester, population 3,370.
LEGAL LOLLAPALOOZA. The banks' incursions have agents fighting for their lives. They're trying to beat off the banks by filing lawsuits, lobbying state and federal politicians, and enlisting state insurance commissioners. "We will not roll over on this issue," says Paul Equale, a senior vice-president at the Independent Insurance Agents of America. "We will litigate in every court possible." Adds Warren Ruppar, executive vice-president of the state agents' association, "We perceive they're breaking the law."
Florida insurance regulators successfully sued last December to keep Barnett from buying its agency. Owensboro National has run into similar snags. First National Bank of Denham Springs has been unable to obtain a license for an agency it created in 1989. The banks are determined, however: Barnett is appealing its ruling, and Shawmut's Overstrom says that if state insurance regulators block his plans, he'll fight all the way to the Supreme Court.
Unfortunately for insurance agents, the courtroom may be the only place they can effectively fight banks. Their political clout has been blunted by publicity of alleged sales practices violations by agents for New York Life, Prudential, and Metropolitan Life. And they've spread themselves thin by taking on numerous other issues, such as health-care reform and interstate banking.
Moreover, many insurers are supporting bankers' efforts because they gain if banks boost sales of their products. Over 40 insurers banded together to form the Coalition For Competition in Insurance Sales and wrote to every U.S. senator to express opposition to limits on bank insurance sales. Insurers know that banks have much more sophisticated systems for analyzing customers' buying patterns than they do. In Europe, banks sell up to five times as many policies per agent as independent agents do, according to William M. Arnold Jr., a principal at management consultants Towers Perrin.
Insurance executives, though, are anxious to avoid alienating agents by going any further to get into bed with the banks. "The agency force is very important to us," says one. With banks on the march, agents can only hope insurers continue to feel that way.
TAKING OFF THE GLOVES
CONNECTICUT Shawmut National bought a New Haven insurance agency in November. The state insurance regulator sued to cancel deal.
FLORIDA Barnett Banks purchased agency last October. The insurance commissioner sued, and a judge ruled against the bank in December. Barnett appealed.
KENTUCKY Owensboro National Bank tried to get authority to license its own agents. The insurance commissioner refused.
LOUISIANA State insurance commissioner went to court to block First National Bank of Denham Springs' purchase of an insurance agency it created in 1989.
DATA: BUSINESS WEEKChris Roush, Hartford with Amy Barrett, Washington