What if producers could identify prospects, create rapport, gather information, quote insurance rates, help select a policy, complete an application, get the policy through underwriting, and deliver that policy -- all without leaving their desks? And what if this could happen on a large scale, fully tracked and duplicated?
An increasing number of producers are doing exactly that by selling primarily term insurance in a direct response fashion. These people are seen in those advertisements for selling large amounts of insurance "in their underwear."
This is direct response life insurance selling. Will it work? Is it profitable? Will it hurt today's life insurance producer? How do they do it? What are the ingredients, and how does this work?
These are the questions I hear regarding selling life insurance without leaving the office.
It works, and it can be profitable. While financial groups, financial advisers, financial planners, and financial networks all have my respect, direct response is today's purest form of life insurance selling. Several factors go into doing it right.
More than $90 billion of life insurance premiums were written in 2002, and a growing amount of that is from direct response sales efforts. Some estimate that 8-10% of the premiums written in 2002 were initiated and fulfilled in some sort of direct response fashion. Direct to the carrier? No. Direct to the producer.
That's right; producers use the Internet, radio, direct mail, inserts, and other direct response media to move people to purchase life insurance. They do this without eliminating the producer or broker; rather, they connect the life insurance producer with interested buyers.
The idea is not to change the distribution channel, but to use the already established channel (individual producers and brokers) to serve millions. Term insurance has become a commodity, and with that change and the digital age come a change in buying motivations.
People still want to protect their families; they still want to buy insurance from someone they like and trust; many simply don't care for an evening-long sales pitch on insurance policies they do not understand.
Direct response insurance selling is real. The trend is significant toward this kind of buying behavior, and enterprising producers will benefit for a generation to come. It is not easy; it is not a panacea, but it is a legitimate business opportunity that many are enjoying.
I see several paramedical services and insurance carriers embracing this niche and designing processes to fulfill the business. Zurich led the way with its Telelife and Z-app process; First Penn-Pacific, Protective, First Colony, Old Republic, AIG/American General, and others are following suit to design systems and make this kind of business easy to transact. Intellisys, a LabOne company, Relia Quote, and BISYS Insurance Services with EMSI have designed back-end fulfillment processes to help the producer transact higher volumes of term insurance business.
The business is littered with many competent producers who are knowledgeable professionals, likeable folks, hard workers, and poor prospectors -- or, likely, they simply are tired of the seemingly endless prospecting grind.
These producers purchase leads or application requests and go to work on the telephone, through fax and e-mail -- and even some snail mail at times -- to establish a relationship, understand the prospects' needs, and recommend a competitive product.
The individual producer stays in the game to get the policy through underwriting, placed, and paid, and he or she receives full compensation on the premium.
Volume rules the day, and often three, five, and even 10 or 12 sales are made in one day's work. Premiums are modest, averaging from $400 to $2,400, depending on the kinds of leads purchased and up-selling effectiveness.
Follow-up, not prospecting, is the producer's biggest task. It is easier to make the sale than it is to get it paid -- a terrific difference from more traditional selling.
Keys to the business include identifying and maintaining a consistent lead source, employing a comprehensive tracking system, having some form of advanced commissions, impaired risk underwriting, and the need to up-sell over the telephone.
Lead sources vary and can come from direct mail, radio, inserts in various periodicals or consumer bill statements, television, and, more prolifically these days, the Internet. Leads are a key to this niche, so the lead's quality and the consistency of its volume are important issues.
A producer considering lead purchases should look closely at how those leads are produced. Three kinds of inquiries are quote request leads, application request leads, and telephone call-ins.
Quote requests close in the 10-15% range, cost $15-$25 each, and require a lot of contact activity to reach the prospect.
Application requests close in the 30-40% range, cost 10-15% of the requested premium ($40-$240), and require less contact activity. With application requests, the prospect has made one buying step and has indicated an interest in purchasing the insurance.
To get the telephone to ring with interested prospects is a trick, but it can be done for $30-$70 each, depending on the geographic area in which a producer advertises and the targeting level and medium used. To get the best value on media, producers want to accept leads from many states.
Resident and non-resident licensing is necessary to sell in multiple states, and producers obtain these licenses with a series of forms and a fee to state governments. A producer should be licensed in as few as five and as many as 50 states to get the best deal on leads.
All kinds of leads are good -- financial considerations usually dictate how many of each an organization can handle and which kind is best for it.
Tracking systems are plentiful; some are better than others. Some are more specialized, and producers should look for a system that distributes the leads to subordinate producers if need be and aids in the selling process.
The tools that technology can offer are almost endless -- from contact management to completing the applications. Additional tools include client e-mails and producer reminders at all stages of the process. The systems available are robust and fun to use. They are fun mostly because they save time and help keep order in what can become a chaotic process.
Producers may want to look for a system from a lead-producing company that comes full of leads. There are systems out there that are capable and fit this description. Lead-producing companies that also sell insurance know the intricacies of getting cases placed and tracking activities along the way.
Web-based is a must; reports are important, and integration with other selling tools or paramed companies is a valuable addition. A good system also can serve as lead quality control. "Dud" leads automatically are tracked, complete with the producer notes and contact activity documentation. A lead producer can evaluate his own traffic forms by querying, say, all the leads from a particular vendor to judge promotion campaigns' effectiveness.
Like all systems, ease of use is a significant factor. Again, hierarchical support is important so that an agency manager can use the tool to manage his or her team.
Financially, most producers require some form of advanced commissions to succeed in direct response marketing. This is because of the significant cash outlay to purchase leads and the old accounting principal called "matching."
While annualized commissions may not be the way to go in more traditional markets, some form of controlled, monitored, wise commission advancement usually is required in this market to reduce the "time to money." Producers can invest thousands of dollars in leads, and with a three or four month time-to-money already inherent to accommodate underwriting and delivery, adding another six, eight, or 12 months can spell financial hardship.
Again, commission advancement cannot be abused, but some controlled manner of financing often is necessary and effective. Persistency rates with low-cost term insurance historically have been favorable, so producers can implement and maintain a good advancement program.
With direct response impaired risk underwriting, the producer has one opportunity to get the case issued properly. Some people try to mislead the producers and insurance companies in hopes of obtaining a lower rate. Impaired risk permeates direct response marketing because the anonymity is perceived to be high.
Producers must take great care to explain how the Medical Information Bureau (MIB) and attending physician statements (APSs) work, being careful not to use those business acronyms on the outside world. This minimizes the declined and "issued other than applied for" policies.
Nothing takes the wind out of a happy, productive producer like a case that cannot be placed. It is costly to everyone involved and non-revenue producing, so great attention must be given to impaired risk underwriting.
Some direct response organizations opt not to work this business. Many have found, however, that if they are in the life insurance business, they are in the impaired risk life insurance business. This market offers excellent potential with higher premiums, motivated buyers, referrals, and excellent persistency.
The keys to success in this part of the direct response business are having empathy, gathering all the information, and obtaining the prospects' premium tolerance near the process's beginning. Producers with experience and a warm personality do well with the empathy; many resources and forms are available to guide the producer through condition-specific questionnaires. Seasoned direct response producers will learn how to secure that premium tolerance, which begins with asking that question early in the process.
Up-selling and proper needs analysis are tricky, but they can be done. In athletics as in this high volume business, often the difference between the great ones and the not-so-great ones is small, but it is compounded again and again to add up to significant differences. And so it goes with up-selling.
This key factor leads to increased average premiums and lower overall lead cost, so it becomes critical to the operation. Producers can up-sell in one of three ways: additional lives, increased face amount, or longer guaranteed rate terms.
Additional lives come from carefully asking questions about spousal insurance and asking for referrals. Increased face amount up-sells not only are possible but also, more often than not, lead to a "suitability" issue for the proposed insured.
The more successful direct response producers ask questions such as: "Many experts suggest that a parent have seven to 10 times his or her income in life insurance. How does that figure compare to the amount you have requested here?" Showing multiple face amounts and corresponding costs also is effective.
Longer guaranteed rate terms come, again, from asking the right questions and showing prospects more options. The producer might ask, "How long do you want the insurance in force?" Comparing the price of a 20-year term policy to a 25- and 30-year policy also may lead the prospect to select a longer term.
Pure selling still is a part of this game, and doing the right thing for clients is of paramount importance.
With these things mastered, the direct response impaired risk business can be personally and financially rewarding.
The business opportunity is grand. Carriers, brokerage firms, paramedical companies, and producers all are recognizing this newer way of buying and selling life insurance. Demographics are good for baby boomers who increasingly will have more impairments (even slight ones) in the coming years. When they are rated or declined by their property and casualty producer's company, where might they go?
The younger generations use direct buying channels more and more each day. One direct response producer put it this way: "Out of 100 inquiries I receive, two or three are from students doing school projects on using the Internet to buy goods and services to run a household. How do you think those kids are going to buy life insurance?"
Like many parts of our business, this is a niche that can work if a producer decides to work it. Tremendous value and satisfaction can come from protecting several families and businesses each day.
It does not hurt that the prospecting is done; a producer can feel multiple victories each workday, and significant commission dollars can make it financially rewarding for everyone involved.
