Converge This

As Sandy Weill goes, so goes the industry? You had to ask yourself that question last month following Citigroup's announcement that it will spin off its Travelers Property Casualty operation, primarily through an IPO. It's not that Weill has soured on the P&C business—far from it. That segment is thriving, at least from a stock price standpoint.

The problem turns out to be the extreme difficulty of cross-selling insurance products, especially P&C products, in a banking environment. By all accounts, efforts to cross-sell P&C insurance in Citi branches have gone nowhere—partly because of the reluctance of other insurance companies to partner with Citigroup (because they believed they would take a back seat to Travelers). But there's another reason, certainly not unique to Citi, that no one ever talks about. I'm about to reveal it, so listen up: BANKS DON'T UNDERSTAND INSURANCE AND DON'T KNOW HOW TO SELL.

I've always found it fascinating that so many people in the insurance industry remain in awe of bankings' purported superiority in customer service and technology deployment. Please! Before I came to Insurance & Technology I covered the banking technology industry. More than 10 years ago, the big topic at conferences was how to encourage and develop cross-selling in the branches. Guess what: they're still talking about it.

One thing you can say about insurance, it definitely has a sales culture. The concept of insurance being sold, not bought, trite as it may be, has a tremendous amount of truth in it. The problem in insurance is that, for so many years, the emphasis was totally on the sale and producing the policy, with very little attention to what follows (a long-term relationship).

So, does this all mean that convergence is a pipe-dream? Of course not. Convergence never should have been viewed as strictly an M&A story. Rather, it has to do with understanding customer needs and providing anywhere, anytime, anyplace, any product responses to those needs. The future of financial services tends to be discussed in terms of either/or: all insurance will be sold on online, or none will...agents will flourish, or vanish...insurance companies will exist, or become extinct. That's not a strategy, or a meaningful analysis.

Sandy Weill is smart enough to know when to change course. I don't think he's given up on convergence, but he clearly has concluded that the 1998 (when Citigroup was created) view of convergence isn't going to work. He's going to try a different interpretation now.

Which should leave you with one thought: Is your organization flexible and sufficiently tech-astute to change course when the conventional wisdom changes its collective mind?

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio