The Truth About Bank Insurance: 4 Myths, Debunked
By Mark B. Egan, Contributor at The Financial Brand
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Executive Summary
- Only 15% of bank customers buy insurance through their bank, despite 44% being willing to — representing up to 20% profit boost potential.
- 60% of Millennials and 63% of Gen Z want to purchase insurance from their primary bank within the next year.
- Modern partnerships and technology let banks offer insurance without internal expertise, using customer data for targeted offers.
Financial institutions have no problem embracing revenue opportunities outside the framework of traditional banking — from BNPL and early-pay access to online budgeting and wealth management services. But one category consistently lags: insurance products. Only 15% of financial institution customers say they’ve bought any type of insurance product through their financial institution, according to 2024 market research by PYMNTS.
This opportunity vs. adoption gap is the subject of a forthcoming white paper being released next month by the American Bankers Association (ABA). “Everyone in banking seems to have forgotten what the advantages of selling insurance have been in the 25 years since Gramm-Leach-Bliley,” says Kevin McKechnie, who leads ABA’s Office of Insurance Advocacy. “The market does not look like the law, and it hasn’t for a while.”
McKechnie — an insurance industry veteran who is also Executive Director of the ABA Health Savings Account Council — believes that banks’ hesitation short-changes both financial institutions and their customers. For the institutions, it’s a missed opportunity to tap into a growing source of steady, recurring revenue that brings the added benefit of deeper relationships and stronger retention. For customers, it’s a missing puzzle piece in an otherwise complete financial offering.
To understand why insurance remains underutilized, it’s worth revisiting some of the most common myths and assumptions that bank and credit union professionals continue to harbor.
Myth 1: Insurance Isn’t a Core Product for Banks and Credit Unions
Alongside earning, spending, borrowing, saving, and investing, protection stands as one of the U.S. Treasury Department’s five foundational pillars of financial well-being. For banks that aim to show up as true long-term partners in their customers’ lives, the opportunity is clear. Consumers value trust and convenience in their financial decisions — and they already rely on their primary bank for both. In the PYMNTS survey cited above, some 44% of consumers said they are willing to purchase insurance from a financial institution, especially younger customers, who are drawn to a more centralized and streamlined financial experience.
Accenture’s 2025 Banking Consumer Study points to a core issue: many banks have grown detached from what their customers really need. “Digitalization has made banking less personal and more transactional,” the report notes. And with limited differentiation among providers, customers are increasingly splitting their financial relationships across multiple platforms. To stay competitive, the report says, banks must move beyond transactional engagement and focus on becoming true financial partners.
Protection fits naturally within that model. In the same study, Accenture found that customers want their bank to act as a protector and advocate — and banks that deliver on that expectation see real results. Institutions in the top 20% for customer advocacy outperformed peers with 2.6x the growth rate. Offering relevant insurance products through familiar channels reinforces trust, strengthens relationships, and deepens loyalty.
Customers’ insurance needs evolve with their lives: health, auto, renters, disability, life, homeowners, supplemental coverage, long-term care. Banks are in a position to serve those needs comprehensively, as a core component of financial care.
“Your cost of acquiring customers for a bank is extremely low: They’re right there,” says McKechnie. “If you want younger people to start buying protection products, you can simply point out, ‘we have your checking account, your savings account, maybe even your HSA or IRA, why aren’t you maxing out your financial strategy?'”
Myth 2: Insurance Isn’t a Commercial Winner
Financial institutions may underestimate just how positive a financial contributor insurance can be to their business. A recent report from Boston Consulting Group underscores the business case. BCG found that retail banks can boost profits by up to 20% by offering insurance to customers who need it. One of the most effective approaches: partnering with an insurance specialist to create integrated processes, tailored offerings, and a more seamless customer experience.
Insurance is also a retention driver, helping to protect relationships as well as assets, according to Dan Bonano, Vice President of Bank Channel Strategy at Franklin Madison, which works with financial institutions to deliver insurance products to consumers. Banks can use them explicitly as a tool to maintain customer relationships and stop fintechs encroaching on their business. “This is recurring non-interest income, and it’s very sticky,” he says. “Once you get that first relationship, it’s much easier to grow your protection suite with that particular customer.”
Meanwhile, awareness remains a barrier. According to another study by PYMNTS, more than half of bank customers (53%) don’t know their bank offers insurance. That’s a missed opportunity, especially given how customers respond once they’re engaged: 76% of those who purchased insurance through their financial institution say they’d be interested in buying more within the next 12 months.
Some banks begin that journey by offering a small amount of complimentary insurance as a reward — a few thousand dollars of basic coverage. This signals value, builds awareness, and makes it easier for customers to find and act on additional offerings as their needs grow.
Dig deeper:
- Drive Loyalty and Engagement with Insurance Products
- Hacking Customer Attention: Leveraging Social Media for Insurance and Finance
- Why Retail Bankers Need to Offer Insurance Now
Myth 3: Insurance Isn’t Sexy
OK — maybe “sexy” is too ambitious. But insurance products have only grown more relevant in today’s market. By most accounts, the world is (and certainly feels) increasingly unstable. Health crises, extreme weather, job disruptions, and the unpredictability of gig economy income have made financial vulnerability both more visible and more personal. McKinsey reported that economic uncertainty hit a record high in March 2025, eclipsing peak COVID-19 pandemic levels, and nearly twice what it was after the September 11 attacks.
Viewed in this context, the bank insurance value prop of protection, simplicity, and trust has strong appeal. And PYMNTS’ research bears that out: About one-third of consumers are more interested in buying insurance through their primary financial institution than they were three years ago. More compelling still, the data shows that demand is especially strong among younger customers: some 60% of Millennials and 63% of Gen Z say they are interested in purchasing insurance from their primary FI within the coming year. Across all age groups, trust in the institution is the leading driver of that preference.
Yet banks often hesitate. “They know their fiduciary responsibility is not just gathering assets but also helping clients protect them,” Bonano said. “That awareness is there, but many bankers will privately admit they could almost be accused of committing ‘financial malpractice’ by being so bad at helping clients protect their assets.”
Myth 4: Insurance Is Too Complicated
For many bank and credit union professionals, insurance is just … different. Commercial bankers who are adept at helping a customer secure a small business loan or line of credit — or well-versed in what happens in the back office after a loan is originated — lack the same grounding when it comes to insurance. The same goes for their colleagues in wealth management, who know the ins and outs of ETFs and index funds but draw a blank when it comes to term life or supplemental health policies. The perception that insurance is too complex, too specialized, or too operationally messy has kept many institutions from giving it a real push.
McKechnie emphasizes that GLB permits banks to act as agents for third-party insurers without being subject to the full regulatory burden insurers themselves face, reducing operational risk and complexity. “Banks are not responsible for insurers’ marketing material or for insurance policy forms or rates,” he says. “Banks act as one of the many licensed agents or brokers in the marketplace. The question for banks is, do you want to help your customers by selling them insurance products or let some other enterprise do it for you? That’s really the only question that matters.”
Financial institutions today don’t have to become insurance experts to bring protection products’ value to their customers. Many are finding success by integrating insurance into team-based financial planning, bringing in specialists to support client conversations and fill knowledge gaps. Others are finding partners that manage everything from product targeting and delivery to compliance and customer engagement. The result is a model where banks can offer personalized, high-quality protection products without overextending their internal teams.
Technology plays a key role. The same tools that power targeted offers and digital engagement for loans or cards now support insurance, too. Banks can present the right product to the right customer at the right moment, whether that’s through an app, a branch conversation, or a follow-up email. Approval flows are streamlined, fulfillment is handled by partners, and customer education can be delivered in plain language. In short, banks can sell insurance with clarity and confidence without adding complexity to the front lines.
The Big Picture
The bottom line is that many of the barriers that once held banks back from offering insurance, and fulfilling GLB’s promise, are no longer in place. Licensing and compliance are easier to manage, customers are more comfortable buying insurance online, and banks no longer need to rely on in-branch agents to get started.
The most consequential change may be the degree to which banks can use their own customer data to make insurance offers more relevant. That might mean showing homeowners’ insurance at the time of a mortgage, or life insurance when a customer starts a family. These timely offers — delivered within a product line that meets the full range of a customer’s needs — enable banks to present themselves as true protectors. Growth in non-interest income follows from there.
Banks don’t have to do everything themselves. With the right partners and tools, they can integrate insurance into the channels they already use, offer consistent value to their customers, and strengthen relationships in the process.
