5 min read

What Financial Institutions Need to Consider When Adding an In-House Agency

What Financial Institutions Need to Consider When Adding an In-House Agency

Kellie Lowder

Senior Advisor

Engage fi (Formerly CU Engage)

Whether a consumer opens their web browser or turns on a TV show, they will be exposed to countless commercials for insurance. The days of shopping through two or three local agencies for your insurance needs are long gone.  Beyond traditional big-brand carriers, consumers can obtain quotes through national banks, auto dealerships, multi-carrier online portals, and even Walmart.  These entities do extensive research and allocate significant marketing dollars to reach consumers at the perfect moment.  While the competition is never-ending, there is a wonderful opportunity for credit unions and community banks to enter this market and be successful.

Many financial institutions see an in-house insurance agency as a natural extension of their core business, providing a steady stream of non-interest income and serving the financial needs of their customers. According to PYMNTS, a quarter of consumers said they would buy life insurance from their banks. About 50 percent of those with life insurance products said they’d purchase other financial products from their financial institutions. This indicates excellent potential for an in-house insurance agency, provided you have the right strategy in place.  When done correctly, there are several significant benefits for the financial institution and the customer.

  • Relationships are strengthened through the additional financial transaction and ongoing engagement.
  • Long-term profitability is incurred as the program experiences growth with renewal business and additional lines of insurance.
  • Brand awareness will increase as you build upon the brand your customers know and trust.
  • The opportunity to offer your customers education and a tailored set of solutions will help them protect their most valuable assets.

Key Considerations for an In-House Agency

Credit unions and community banks frequently look for ways to enhance customer relationships and increase share of wallet. Insurance can be the next step to offering a full suite of financial services while having a positive impact on your financial institution’s bottom line. During the process of evaluating this new line of business, there are a few important considerations to include.

  • Meeting the Need: Offering a suite of insurance products that protect customers and save them money.
  • Marketing Effectively: Designing a marketing plan that aligns with your culture, fits within your budget, and creates significant product awareness and consumer touchpoints.
  • Improving Financial Health: Offering customers insurance education and a tailored set of solutions so they can protect their most valuable assets.
  • Risk Tolerance: Selecting from a diverse set of insurance models that allow for varied levels of financial risk and return.
  • Structure and Staffing: Building the right team, coupled with technology and logistics, who can provide the customer with an excellent end-to-end experience.

 Every customer who finances a home or a car, rents an apartment, grows their family, or starts a business, will need insurance. As their financial partner, you are privy to many of these events, and you possess a wealth of data to seize on opportunities. Securing insurance is a need for all customers; why not address those needs through the financial institution they already know and trust?

Three Insurance Models to Evaluate

Financial institutions should assess how much time and resources they want to spend educating themselves and building the business needed to get an agency off the ground and on the path to profitability. When considering adding insurance services, there are three general models to create an in-house agency.

  • Buy an Agency: One of the quickest ways to get started is to purchase an existing agency. Extensive due diligence is critical when considering such a significant, upfront financial investment. You should include certain questions, such as why the owner is selling, how profitable is the business, and will existing policyholders be satisfied with the new ownership and branding? While some financial institutions use this model to grow or expand their existing agency, first-time buyers may want to consider a third-party consultant or valuation firm to guide them.
  • Grow an Agency from the Ground Up: This is a great option for financial institutions which seek to maintain control of the business, branding, and policy ownership.  Unfortunately, this model can take significant resources and sometimes three to five years to become profitable. Getting an in-house insurance agency up and running is a difficult task, but with the right tools, thoughtful business plan, and experienced team, many institutions have found success.
  • Partner with a Third Party: For financial institutions with limited resources or which may want to share in the investment, partnering with organizations who offer expertise, carrier relationships and technology platforms, can help you get your agency off the ground. With this model, it’s important to understand the level of control and decision-making opportunities you will have in the business. Will you be able to build the customer relationship effectively? To create a future asset, will you have full or partial ownership of the book of business?

Even though there are many self-serve options for consumers, there is a real advantage to having an agent operate as a trusted advisor.  A recent survey by Agentero reported that 64 percent of millennials and 54 percent of Generation Z consumers say they still plan to use an insurance agent. Older consumers were much more likely to say they trust their agents, with 79 percent of baby boomers, 67 percent of Generation X, and 74 percent of millennials stating they trust their insurance agent “usually” or “always.” Insurance coverage is complicated, and this direct consultation can take the stress out of purchasing a policy.

For financial institutions, there is significant value in delivering a great experience from end to end, but it must be done correctly. There are several key considerations during this process.

  • Research Options Thoroughly Before Committing: Understand what each option will cost in time and resources and how long it will take to be up and running. Compare models, tap into industry resources, and develop financial goals for your agency. While the business and product offerings are likely to evolve over time, it can be difficult to change courses in the short term.
  • Know the Product Mix: What are the right solutions for your market? Can you effectively launch ten different insurance products and provide the expertise to your customers? Some agencies struggle to manage multiple carriers and varied product lines in the beginning. A more coordinated approach to your offering will yield better results.
  • Gain Brand Awareness: One of the biggest pitfalls when growing an in-house agency is marketing. Once you have your strategy in place, an effective marketing plan is critical to long-term success. Utilize existing business transactions to incorporate insurance (auto loans, refis, credit cards, etc.). Be sure to talk about your product offerings during each customer engagement. Employees may initially be hesitant to bring up new subject matter, but there are effective ways of getting them excited and engaged. Don’t spend all your time getting the agency up and running only for it to fizzle out and die.
  • Keep Expectations Reasonable: Growing and managing a successful agency is not a short-term proposition.  As in any new line of business, management needs to be committed to providing the resources and allowing adequate time for success.  Be suspicious of anyone who tells you that it’s easy to make money in the first couple of years.  Based on the model you select, the path to profitability and business ownership can vary greatly.

Final Thoughts

There are many options your financial institution should consider when evaluating the addition of an insurance agency to your offering. The path you decide on can significantly impact the outcome of your efforts. Following an assessment of your objectives and business goals, a consultant with experience and knowledge of your industry can help you create the right strategy and long-term business model to build your in-house agency.

Kellie Lowder brings almost three decades of experience working with FI’s to help them achieve their goals. Prior to joining Engage fi, Kellie was operating as a partner to our team while growing and managing her own consulting firm. Her passion for insurance comes from working with clients across the US, including as an executive at SWBC for almost 15 years prior to starting her own business. As senior advisor, Kellie works with our team to serve our clients’ insurance needs. She utilizes her expertise to consult with financial institutions as they navigate key insurance decisions and negotiations.

To schedule a time to speak with Kellie or one of our other consultants about your financial institution’s in-house insurance agency strategy, please call us at (844) 415-7962 or click here to book a call online.

Community Choice Case Study

Community Choice Case Study

Why did you enlist us for help? Community Choice is a $1B asset credit union headquartered in Michigan with an eye on growth and providing an...

Read More
Employee Spotlight – Andrea Rusnak

Employee Spotlight – Andrea Rusnak

We are shining the spotlight on Andrea Rusnak this month. Andrea is Engage fi’s Director, Payments Consulting Group and has been with us for five...

Read More
Community First National Bank cites exceptional service and mid-size bank advocacy as reasons for selecting Engage fi.

Community First National Bank cites exceptional service and mid-size bank advocacy as reasons for selecting Engage fi.

Passion and Proven Process Cited as Major Factors in Decision to Partner with Engage fi. Tampa, FL September 13, 2023 – Engage fi, a prominent bank...

Read More