Small Agents Want Banks Kept Out of Insurance Business : Finance: Brokers say they’re already in a ‘fire sale,’ claim lenders would have an unfair advantage.

NEW YORK —  As lawmakers in Washington debate measures to allow banks into the insurance business, independent insurance agents say they are already squeezed by intense competition, lower premiums and rising costs.

The last thing most want to see is the neighborhood bank branch hanging an “Insurance Sales” sign in the window.

“Insurance is in a fire sale already,” said Andrew Robinson, an agent in Pleasantville, N.Y. “There’s terrific competition for customers.”

Powerful insurance groups derailed an effort Tuesday to include as part of a bill approved by the House Banking Committee a provision that would have allowed banks to sell insurance. The bill gives banks broader powers to sell securities.

But other bills are under consideration to give banks greater insurance powers. And though they are generally barred from selling insurance in big cities, banks are venturing into annuity sales and can sell life and other insurance policies in small towns.

Independent agents--which contract with different insurance companies to sell policies--face stiff competition from “captive” agents, who sell only one type insurance.

In addition, premiums for common types of insurance such as auto and life in many parts of the county are flat to lower, which cuts into agents’ profits. Meanwhile, small independent agencies typically have higher operating costs, which affect their ability to offer competitive prices.

Studies show that the number of independent agencies is shrinking and that those left are not selling as much insurance as they used to.

In 1992--the most recent year for which data is available--there were 46,000 agencies, down 16% from 53,500 in 1987, according to the Independent Insurance Agents of America, a trade group. Part of the shrinkage comes from consolidation as agencies buy each other out or merge. The study found that in 1983, two out of three agencies were small businesses employing an average of six people and generating $1 million or less in annual property-casualty premiums.

By 1992, small firms made up 41% of the industry. Most firms now employ 10 people on average, though some firms have grown to 100 agents.

The IIAA estimates that in 1992, there were 450,000 independent agents nationwide, down 3% from 1987.

The decline also reflects greater competition from captive sales agents.

Agents say it is not just the added competition they fear from banks. They say banks would have an unfair advantage because they can steal insurance customers by persuading them to buy a car insurance policy in order to obtain a loan. Such tying of bank products is illegal.