The delay in implementation of the DOL fiduciary rule gives us pause from the mad dash to implement its provisions to reflect on where the industry is headed and the necessary changes that must be made in the operation of life insurance and annuity marketing organizations. In this article I will give you my thoughts on how we will likely need to structure business for the new regulatory world that awaits.
Over the last 20 years, I have worked in the financial services industry in the U.S., Europe, Australasia and other countries. I have been part of industry efforts to reform how business is conducted in an attempt to provide better advice, products and services to consumers in each of these locales. Overall, I am more convinced than ever that the products and services we provide are essential to help families, individuals and businesses prosper. But I am a realist and know that sometimes our business practices need reinvention. We also need to make long overdue technology investments in how the industry’s products and services are delivered. I believe a revised business model is needed that will breathe new life into how insurance sales and wholesaling should occur in 2017 and beyond.
The Life Insurance Marketing and Sales Conundrum
A shrinking pool of licensed insurance professionals are aging, retiring, leaving or dying at a much faster rate than new professionals are entering the industry. The current industry pool is continually being cannibalized and split among competing wholesale agencies/marketing organizations. The sales productivity of the existing pool of producers also continues to decline each year. Overall, our businesses lack what I call “stickiness” of their producers, wherein the existing producer pool does not demonstrate much year-to-year loyalty and consistent production.
The Paradigm Must Change
At the same time that we are dealing with an aging agent population and decreasing productivity, regulators are asking that insurance marketing organizations assume a more encompassing role in the vetting, supervision and monitoring of business quality of their agents. The DOL rule, the first major proposed reform to ERISA in over four decades, requires a system of supervision that most insurance marketing organizations are incapable of implementing or managing. Based on my experience we can expect this need for us to provide greater agent oversight and supervision to be required as new regulatory reforms are developed. This means business owners must have the business practices and technology in place to deliver on these new supervisory requirements or cease to be in business.
In addition, we are seeing new online insurance sales initiatives eating up some consumer demand, but the need for life insurance and annuity products among consumers that are delivered face-to-face is still very high. Women lag behind men in ownership of life insurance policies, although many families rely on the woman’s income.1 The fact of the matter is life insurance and annuity products need to be sold face-to-face by an insurance professional who is knowledgeable and trained on the products and can help consumers find products to meet their needs. Our current environment demands a completely new, disruptive approach to attract new lifeblood into the industry and improve the productivity of existing producers to reach consumers who really need what the life insurance industry has to offer.
More than 60 million households need more life insurance. Today, the underinsured market is one of the top marketing opportunities. LIMRA estimates the average coverage gap among life insurance owner household is $225,000, equaling a $7 trillion market.1
In addition, Millennials need to be a major focal point for life insurance sales as they are now entering their peak earning years and they express a desire to speak to a professional to ask questions about insurance. This generation is currently the largest in the U.S. and 65 percent of Millennials state they are likely to buy life insurance during the next 12 months.2
Nearly 70 percent of consumers do not know that life insurance benefits are often income tax free and over 50 percent of consumers do not know that permanent life insurance can accumulate cash value that they can borrow. This is where education comes into play, to show how many of the features of life insurance can help address the key financial concerns that many pre-retirees and retirees may have about the future.
As an insurance marketer, you probably feel like your business model is under attack. You know you need to do something, but in these uncertain times change feels even more uncomfortable.
The Solution - The Independent Captive Marketing Organization (ICMO)
Remember the days when the”giants“of insurance marketing and sales attracted agents to their career agent forces? They did this by providing a structured sales and marketing system, ongoing mentoring and, sometimes, consumer leads. And it worked very well. But the costs for the giants proved too high to sustain so they effectively outsourced sales and marketing to what became independent marketing organizations.
Today technology, product innovation and improvements in carrier delivery capabilities have lowered the cost of creating, maintaining and managing a productive captive sales force. I believe the creation of captive sales forces selling a broad set of product offerings from a small group of quality carriers using a strong technology infrastructure is where we are headed. This is a new “Independent Captive” paradigm that will fit the emerging needs for regulatory supervision and oversight. It will also allow us as life insurance marketers to spend time on what we do best – working with consumers to help address their financial needs. I call this new structure the Independent Captive Marketing Organization or ICMO.
The ICMO will be designed with a structure that provides:
Having the Courage to Change
As I have experienced disruptive changes in how insurance distribution operates, the keys to a successful transition are the courage, desire and ability to change. Many financial professionals will not want to conduct their business operations using new technology tools. Instead they will elect to leave our industry though retirement, sale of their business or movement to a new field. I believe that consumers very much need what we have to offer to help them plan and protect their financial futures. Using the new ICMO structure will enable us to migrate to a new business model and be better able to meet consumer needs and provide career opportunities for a new generation of financial professionals. The question is does your business have the courage to make the change?
These are exciting and challenging times and an openness to new operating models will be essential for growth.
Harry N. Stout
is the managing director and CEO of LifeAnswers Marketing Group. LifeAnswers, which has been designed for existing independent marketing organizations and independent insurance agents, combines 100 years of industry experience, next generation technology, and leading compensation and training programs. With a core focus built around helping individuals build and grow their business in the life insurance industry, LifeAnswers’ model takes the innovative approach of helping agents embrace new methods to success, including a step-by-step process to build their own teams. Stout is an acknowledged senior leader in the global financial services business with experience in all key industry business lines, with particular expertise in marketing, sales, product innovation and distribution. He has over 25 years of financial services industry experience in the U.S. and abroad, working in Europe, Northern Asia, Africa, New Zealand and Australia. Stout can be reached via email at firstname.lastname@example.org.