We have a tremendous customer base to draw from, and its the relationship be-tween our agents and our policyholders that no one else can match, adds Engerman. But having over 16,000 distribution centers (agents) can also pose some interesting challenges, especially involving training and IT considerations. The biggest challenge we found [when State Farm started the bank in late 1998] was having no roadmap to follow. Because our folks are independent contractors, the process had to be engineered to support their needs specifically, Nichols says.

Challenge and Opportunity

Those needs encompassed everything from getting more than 16,000 people up to speed on computer technology to educating the force about the new products. Its been a challenge, but with challenge comes opportunity, offers Nichols. We tried to go into [setting up the bank] without any preconceived ideas about having to do things the way they had been done in the past. We wanted to allow some flexibility as we moved into the future because we knew there would be some surprises along the way.

Included in the positioning of that flexible mindset was the realization that the firms legacy-based systems would not support banking services very well. In 1996 and 1997 when the bank first became an idea, the technology being used then was more legacy and platform based than Internet or Web based. We realized we had to build a thin-client environment because we recognized having over 16,000 locations would make it extremely difficult to update and maintain software using the old technology, explains Nichols.

State Farm bought the components it needed to set up the Web-based system for its agents. It then wrote the code necessary to integrate the various parts of the system, allowing agents access to the range of bank services.

The company is still in the throes of transforming its legacy insurance systems to the thin-client environment, with the main systems residing on centralized servers. Core processing of the various banking functions involved in, say, checking or savings, have been outsourced to third-party processors, allowing the significant State Farm telecommunications backbone to be leveraged to provide accessibility to the force.

New Infrastructures, New Skills

The educational process has been a huge success, evidenced by the fact that 95 percent of the State Farm agency force has recognized the opportunity to offer banking services to their customers and has taken advantage of the banking education programs.

Adding new services is right in line with agents normal mode of seeking new ways to do business. Having to retrain deeply established habits in using legacy-type systems is not. The addition of banking services brought with it an entirely new infrastructure based on the Internet. Many State Farm agents, however, were not used to Web-based applications, so the firm rolled out the banking system in a controlled manner. The company gave agents pre-study materials for the training classes that were held to get the agents up to speed on current technology. Training was held on a regional basis, causing the initial rollout to take about two and a half years.

We ended up embracing interactive distance learning, and we now use that to train agents and their staffs much faster, says Nichols.

The legacy system still exists on the insurance side, accommodating insurance sales, which now include fixed and variable annuities that are sold through the bank. It coexists with the new Web-based systems on the agents platform. Its a cross between a thin-client and a pseudo-fat-client environment, Nichols explains.

MetLife created MetLife Bank through acquisition. Its primary purpose is the same as State Farm Banksto round out services to customers. The bank offers regular services, such as checking, savings, and certificates of deposit, but will soon be rolling out college planning, retirement planning, and wealth management products along with loan products and rate calculators. There will also be a feature on the site that will help customers compare various investment products. The firm uses its Web site primarily as an educational venue for its customers as well as a marketing channel for product.

Through its investment arm, MetLife Investors, the insurer has also formed relationships with outside banks, creating a vast distribution channel for its life insurance products in addition to MetLife Bank.

We sell fixed and variable annuities, and we also have a formidable life group that is not quite as prevalent within the banking community as it is within the independent, regional, and wirehouse broker/dealers, explains Les Sutherland, executive vice president of sales for broker/dealers and banks at MetLife Investors. Being in the marketplace for only two years, we have tremendous capacity for fixed and variable products.

Banks Are Different

Sutherland contends the needs of a banking channel are different from those of other distribution channels. Its comprised of two groups, primarily. Large and regional banks have platform programs with the Series 6 people [selling mutual funds to retail investors], then they have dedicated reps that are Series 7 licensed who go out and call on the branches [with mutual funds and other investment products]. So at a big bank, you may have as many as 1,600 reps supporting the banking interest in the community, he says.

Both Sutherland and Nichols stress the importance of technology in serving the banking networks. Being up to speed with technology systems is paramount to your success within the banking community. Without a current technology platform, you can have all the agreements in the world, but youre not going to get anywhere because you just cant do business without effective IT, offers Sutherland.

One of the first things MetLife does in looking to bring on additional banking distribution is to make sure that were synced in and that we involve our service people in Des Moines as well as IT people to assure well be synced in with them going forward, Sutherland adds. Many banks MetLife deals with are set up for electronic order entry and even field issue on contracts. Weve found at MetLife we can accommodate just about any systems functionality they may have, explains Sutherland.

We realize new technology is out there providing some opportunities for us to be able to handle challenges better in the future, but theres a lead time in maintaining old stuff and installing new, so theres always a challenge there, explains Nichols.

Scale is extremely important at State Farm. The company has made a commitment, as has MetLife, to support and enhance its financial services offerings going forward. According to Nichols, technology companies have been developing servers that can bunch smaller servers together to provide huge processing capabilities, creating scaling abilities that will enhance platforms and streamline services offered on the Internet.

Slow in Changing

But the transformation on all sides is slow. For State Farm, we have 16,000-plus agents who run the gamut of being comfortable with technology and not. We keep encouraging folks to try it, and we think they will like it. The next issue for us is, now that we have Generation One in, what should Generation Two look like? Whats the func- tionality that we need to put into play? offers Nichols.

Generation Ones primary goal was to get the entire agent force at basically the same level of comfort with using the Internet and a Web-based system, which went hand in hand with the rollout of the new Web-based banking services. That was no easy task, considering the variety of comfort and use levels that existed over such a large sales force. The one-on-one sessions were a big factor in accomplishing this feat. In addition, the switch to distance learning through the Web facilitated learning at each agents individual pace.

Both companies see the future holding increased participation in the insurance side of the business by non-traditional players, such as CPAs, attorneys, and other new entrants into financial services. Competition will increase, creating further demand for firms to be on top of current technology.

An additional fly in the ointment in providing financial services through insurance companies is the privacy provisions set forth in the Gramm-Leach-Bliley Act. Adds Nichols: We try to make sure we provide the tools we need for everyone, but we have to do it in a controlled environment.