Annual Conference

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Annual Conference Atlanta, GAOctober 8-10, 2003
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Bank Insurance ReferralsThe process of merging
cultures

• Presented by
• DANIEL R. MEYLAN, ARM
• President, Peoples Insurance Agency

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Profile of Peoples Banks and Peoples Insurance
Agency
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Difference in Cultures
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Differences in PL Statements
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Business and Economic Realities

• Operating Profit is mandatory for insurance
  agency survival
• To be profitable, an agency must generate between
  85,000 to 150,000 of commission income per
  full-time employee, depending on location and
  product mix
• Commercial Lines Insurance generates higher
  profit per account
• Personal Lines Insurance is very profitable if
  volume is large enough
• Employee benefit sales typically have the highest
  profit margins in a commercial insurance agency

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Business and Economic Realities

• Life Insurance and Annuities are always
  profitable with adequate volume
• Each insurance product (commercial, personal,
  group, life) requires a dedicated expert in that
  product to maximize revenue and profit
• The bank owned insurance agency should
  communicate their strengths to their bank
  partners and ask for referrals in those areas
• Insurance agencies that rely exclusively on bank
  referrals for new business will fail

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Our Referral Program
Peoples Insurance Agency, Inc. will track
referrals and production by location, by employee
and report those results periodically to CEOs
and senior management. (Sample report attached)
Referrals may be provided using the forms created
for that purpose or by sending the pertinent
customer information to Peoples Insurance Agency,
Inc. A single person will be the clearing-house
for all of the referrals. It will be their
responsibility to maintain an up-to-date database
of all insurance referrals. When a policy is
sold, they will see that the appropriate
individual and location is credited for that
sale. The objective for Commercial Loan Officers
is to refer every new commercial loan document
(new, rewrite or renewal) to PIA. Recognition and
rewards will be given to those individuals and
locations that refer the highest volume of
referral revenue or premium. CEOs will be held
responsible for the overall referral objectives
in their areas of responsibility. Producers and
staff of Peoples Insurance Agency, Inc. will be
responsible for contacting each referral and
making the best possible good-faith effort to
sell an insurance product to individuals or
businesses referred by a Peoples Banker. During
the course of the year, training will be offered
by Peoples Insurance to Peoples Bankers on the
subject of insurance and how to look for and
qualify quality insurance prospects.
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Our Referral Program
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Our Referral Program
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Establishing Reasonable Referral Expectations

• By
• Number
• Revenue
• Profit
• Business Segment
• Line of Business
• Individual Banker
• Branch
• Organization
• Target Closing Ratio
• Track Non-Bank Referrals

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Tracking Referrals

• Who
• What
• Where
• When
• Outcomes by individual
• Outcomes by branch
• Outcomes for the entire organization

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Tracking Referrals

• Ownership of the tracking system
• Time and resource commitment to tracking system
• Evaluation of the results
• Accountability for the results

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Training the Banker

• Basic insurance knowledge
• Learning the referral process
• The insurance sales cycle, what is a renewal
  date?
• How to identify an insurance prospect
• How to introduce a potential insurance prospect
• How the insurance sales and marketing process
  works

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Training the Banker

• Insurance competition
• Insurance service issues
• Insurance marketplace issues
• Insurance companies and products available in the
  agency
• Qualifying a potential prospect
• Time and resource commitment to training, bank
  and agency

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Training the Insurance Producer

• Communications with the banker who sent the
  referral
• Involving the banker in the sale
• Building one on one relationships with bankers
• Referring insurance customers to the bank
• Participating in commercial loan meetings

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Ethical Issues

• Bank customer may be a poor insurance risk
• Insurance risk evaluation reveals poor business
  practices
• Cancellation or non-renewal of bank customers
  insurance
• Best coverage or cheapest coverage

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Compliance

• Disclosure statements
• Information sharing
• Gathering underwriting information from bank
  client file

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Compensation for Referrals

• Part of bankers job description and performance
  evaluation
• Bank Manager accountable for insurance production
  goals for their charter and branch
• Stakeholders Program-Comprehensive Compensation
  Incentive Plan
• Contributions by insurance agency to stakeholders
  program through agency profits

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Peoples Insurance 18 months of results -
January 2002 to June 2003
ofBank Referrals Agency
Total Referrals Received 998Referrals Open (as
of 6/2003) 26Referrals Sold 151 10.3Prem
iums 728,158 11.8Revenues
102,378 13.6Closing Ratio
15.1 Total Agency New Accounts Sold
1,459 100Premiums 6,189,724 100Revenues
751,389
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Referral Results Sept 2003

• Sept results when available

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ABC Aviation - Success

• Sr. Commercial Lender introduces insurance
  producer to commercial borrower
• Insurance Products Sold Auto, Property, General
  Liability, Workers Compensation
• Account Premium 175,000
• Account Revenue 22,000
• Time from Introduction to Sale 10 months

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Billys Builders the unethical bank customer

• Bank customer is large residential homebuilder.
  Bank is providing construction financing and
  loans on commercial real estate owned by builder.
  Insurance producer conducts an in-depth risk
  analysis and prepares underwriting submissions
  for insurance marketplace. Borrower has marginal
  reputation with insurance market due to adverse
  loss history and a standard practice of
  misrepresenting payrolls and sales figures to
  insurance underwriters. Insurance agency declines
  to offer a proposal.

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Insurance to Bank Referrals Agency Principle or
Community Bank President

• Bank acquires a platform agency with 2,000
  customers in a community where it has no
  presence. A branch is opened and the insurance
  agency president, a high profile member of the
  local community, is named Community Bank
  President. After 30 months of operation the
  branch has
• 15m deposits
• 15 of bank customers are agency customers
• 30 of deposits are from agency customers
• Construction underway for new bank/insurance
  facility

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Conclusions

• Understand your cultures
• Establish a tracking system
• Train both bankers and insurance agents
• Establish reasonable goals
• Build on successes, learn from failures
• Be committed but be patient