First Federal Lakewood in Ohio is like a lot of banks these days: It wants more fee income but doesn't have a lot of extra capital to invest to get it.
Early this year, the $1.2 billion-asset bank turned to Insuritas, an East Windsor, Conn., firm that installs turnkey insurance agencies for banks and credit unions.
By July, its agency was in full swing.
"While we have adequate capital, growth is somewhat capital constrained," said Gerald Buck, executive vice president at First Federal Lakewood. "Doing it this way drives revenues without putting on more assets."
Banks' need for new sources of fee income on a budget is good news for Insuritas, said Jeffrey Chesky, the president and chief executive of the 12-year-old firm.
Insuritas has signed up five bank clients so far this year, and expects to end 2010 with as many as 10 new clients, he said.
It currently has about 30 bank and credit union partners, with an average size of $1 billion of assets.
It most recent client is Mid Penn Bank in Millersburg, Pa.; the two announced the deal in September.
"No bank president wakes up and says, 'I want to own an insurance agency,' " Chesky said. "But given the regulatory environment, they are all being forced to look at new sources of fee income."
Insuritas' agencies focus on risk management products for retail and commercial customers — including auto, home, business, life, health, identity theft, pet and warranty insurance.
The idea is to provide bank and credit union partners with a stream of recurring fee income, Chesky said.
Insuritas does not install physical agencies within its partner banks and credit unions. It employs 31 agents, licensed to sell insurance in 44 states, at its offices outside Hartford, Conn.
"If you call Mid Penn, ask for insurance and hit extension 5," Chesky said, "we answer in Connecticut: 'Mid Penn Insurance Agency, how can we help you?' "
Putting agents in branches does not make sense from a cost standpoint because insurance has become a commodity product, he said.
Insuritas has had success driving traffic to the Web: Nearly a quarter of the price quotes it delivers are completely electronic, Chesky said.
First Federal Lakewood adopted the service to get a new commission stream, but also to improve customer loyalty, Buck said.
"We think it's important that we have as many touch points as we can with our customers," he said.
"The more ways our customers are dealing with us, the more likely is it that they will be loyal to us."
As far as fee income, the bank already has substantial mortgage banking operations, Buck said.
But there's always room for more, he said.
"The mortgage banking business creates more opportunities for the insurance agency," Buck said. "These things tend to compound among themselves."
Offering insurance is a way to shut the door against rivals, Chesky tells his clients.
"Borrowers need insurance," he said. "So you can approach both needs at the same time — rather than sending them to State Farm or Met, which both have banks."
Chesky hopes to have continued success in 2011 by focusing on banks that have bought large insurance agencies but been unable to cross-sell their products to bank customers.
Large banks will hire Insuritas, he predicted, to "run the insurance aisle in their stores."
The banks' agencies will then be freed to sell noncommodity insurance products to commercial customers, Chesky said.