Allstate Is Latest to Open Bank
Following the trail blazed by State Farm Insurance Cos. and MetLife Inc., Allstate Corp. today became the latest insurer to open a bank, using its network of 2,000 California agents as a testing ground.
Allstate Bank will offer checking accounts, certificates of deposit and mortgages through its California offices as well as nationwide via a Web site and a toll-free telephone number, said Kevin Slawin, the bank’s chief executive.
Northbrook, Ill.-based Allstate, the nation’s second-largest insurer, hopes to convert insurance customers to bank customers by offering better-than-average rates and plans to eventually expand to agent offices nationwide, Slawin said.
Allstate’s move is an example of the growing trend toward financial-services convergence, as insurers start banks, banks buy insurance operations and credit issuers expand their insurance operations, said Val Jordan, president of bank and insurance consulting firm Jordan & Jordan in Belchertown, Mass.
The nation’s largest insurer, State Farm of Bloomington, Ill., was the first insurer to start a bank in 1998, and several other companies, including MetLife of New York, have since followed.
But analysts say insurers’ name recognition and large customer base might not be enough to persuade people to buy bank products.
“This is going to be an uphill battle for insurance companies more than for banks,” Jordan said. “Customers have tremendous loyalty to their banks. They don’t have the same loyalty to their insurance companies.”
Allstate has been trying to position itself as a financial planner to the middle class, its longtime core market and one that is generally seen as underserved by the financial-services industry.
Many Allstate agents already sell the company’s annuities and mutual funds. The sale of money market accounts and federally insured bank products “is an extension of our retirement-services strategy,” and one whose time has come, Slawin said.
“There’s an awful lot of money flowing out of the stock market into safer vehicles right now,” Slawin said.
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