Three decades ago, the insurance distribution channels were not what they are today. The concept of an independent producer was fairly new -- in fact, the independent brokerage channel was practically nonexistent at the time, as about 85 to 90 percent of policies were written by captive agents. Some carriers even went so far as to forbid agents from writing through a brokerage, and any operating BGAs tended to specialize in inexpensive term life insurance or substandard underwriting, said Robert W. MacDonald, a former field agent who is now the retired CEO of Allianz Life of North America and president of CTW Consulting LLC.
"If someone were to say 'independent agent,' you'd think of a P&C guy. The environment was very different," MacDonald said.
As the industry continued to evolve in the mid-70s to early '80s, carriers began to lag in meeting the changing needs and demands of consumers. Blaming the agents, the companies began reducing their captive agents, said MacDonald, driving them out of the captive channels and into independent practices.
According to the 2007 Brokerage Study conducted by Agent Media (the publisher of the Agent's Sales Journal) and the National Association of Independent Life Brokerage Agencies (NAILBA), the tables have turned: 83 percent of agents label themselves as independent, with 18 percent falling into the captive and semi-captive statuses.
The study was designed to gauge producers' experiences in the insurance industry in general, as well as agents' relationships with their primary BGAs. We also asked agents about the essential components of their day-to-day business. The resulting picture painted by today's agent force is one of a growing, changing, and thriving business.
A look at the average agent
Thirty percent of agents derive the majority of their total annual commission from the sale of life insurance. Most (60 percent) reported that their comm-issions increased over the past year, and 88 percent expect increases in the next 12 months. (Charts 1 and 2)
"My business has increased," said Gregg Bisson, owner of Stride Marketing. "There's a lot of change going on in the industry -- the tree is being shaken by a lot of regulators, which is good."
Forty-five percent of agents receive
100 percent of their total personal income from selling insurance and financial products. Twenty-eight percent of agents get 1 to 10 percent of their business from renewal commissions. And 33 percent said 11 to 25 percent of their new insurance sales come from clients who have purchased an insurance product from them in the past.
Forty percent of agents sell the most insurance to those in their 40s, and 46 percent report that 36 to 50 percent of their sales are to female clients.
Brokerage relationships
Agents on the whole seem satisfied with the BGAs through which they broker their business. Forty-six percent of agents say the sales support provided by their primary brokerage agency is "very useful," and 42 percent report it's "somewhat useful." (Chart 3) Yet while 54 percent of agents say they are generally satisfied with the support they receive, they would also consider moving their business to a new BGA if a better option came around. (Chart 4)
What constitutes a better option? The majority (43 percent) indicated a lead offer would most likely influence them to write business through a BGA they've never worked with in the past. Other motivating factors include a higher commission offer (41 percent), a new product offering (34 percent), or a referral from another agent (33 percent). (Chart 5)
Yet the reasons why agents leave their primary BGA in the first place indicate that revenue takes a back seat to choice: The majority stated they'd leave if their BGA stopped working with the carriers that their customers need (38 percent).
Sixty percent said that access to multiple carriers and product lines are among the most important services that BGAs can provide for them. (Chart 6)
And it's not just the consumer service experience that matters to producers: Forty-eight percent said live telephone support is one of the most essential services a BGA can offer. (Chart 6)
"I'd like to talk to a live person, not do everything by email, etc. When I'm told, 'We will get back to you,' do it in a reasonable amount of time, not two days later," said one agent.
Customer service is another hot button issue, as indicated by the 23 percent who said challenges in this area would be the most likely to drive them away from a BGA.
Mutual challenges
Prospecting, as usual, is one of the biggest hurdles in the insurance profession -- 67 percent of agents say it's one of the most challenging aspects of selling insurance -- yet two-thirds of agents (67 percent) spend less than 25 percent of their time prospecting. (Charts 7 & 8)
According to Bisson, "Prospecting is almost a full-time job in this business. Your phone is never going to ring and people won't refer others to you just because you're the greatest person in the world. You need to constantly get in front of people who are not your clients."
To combat the prospecting barrier, 66 percent of respondents said referrals are the most effective method for finding new clients. (Chart 9)
On the other hand, only 17 percent of agents this year said they spend most of their income on marketing themselves, as opposed to 31 percent in 2006. But marketing is still an essential component of any business that cannot be ignored, said Bisson.
"I think it all comes down to money. I spend 20 percent of all revenue, prior to taxes, on marketing," he said. The first question I ask every agent when they're having trouble prospecting is, 'How much time did you spend?' Prospects aren't free, unfortunately."
Numerous other challenges, ranging from the administrative demands of running a business to making a sales presentation, can directly affect an agent's business. For instance, Chad Slagle of Slagle Financial said negative media attention can hamper progress on a sale -- something 22 percent of agents recognize as one of the biggest obstacles they face. He said the best tact to help build credibility is to acknowledge the issue without ignoring it.
Knowledge is power
Experts say that belonging to industry organizations can create unparalleled training and networking opportunities as you meet and speak with highly successful producers. Said Bill Smith, president of Great Lakes Retirement Group, "People need to be attending everything they can where there are people who are mega-producers in the industry. (The top producers) give ideas and talk about strategies. There are all kinds of big events folks can go to in order to get top-notch training."
Agents are beginning to take advantage of these training opportunities -- 75 percent of agents in the past 12 months attended two or more events, and 82 percent said they intend to attend two or more such events in the next 12 months.
And 38 percent said this year that they would be willing to attend a live conference, seminar, etc. that was held elsewhere in their state, up slightly from the 34 percent in 2006 who indicated the same. Yet 19 percent last year said they would attend an industry event even if it was held out of state, compared with 23 percent this year. (Chart 10)
Professional training can also come in the form of mentors and coaches. According to the study, 29 percent have a mentor (someone they do not need to pay) or a personal coach (someone they do need to pay).
Said Slagle, "One thing that's been extremely important is I had mentors in my life ... Whenever I find a broker who's more successful than I am, if they're doing better than me, they must know something I don't.
"Even the best athlete in this world needs a coach, and our industry should be no different," Smith added.
Online webinars and CE courses are also great sources of training -- 82 percent of agents said they had logged onto an insurance-related online event in the past 12 months. And 65 percent of agents prefer to take their CE credits online.
In addition to online training, when it comes to technology, agents rely mostly on email (95 percent), fax machines (95 percent), and their company Web site.
"It's not knowledge that gives you power, it's the application of that knowledge that gets you there," said Smith.
Now that you know how your colleagues run their day-to-day business and their feelings on the brokerage distribution channel as a whole, it's time to assess your own experiences and opinions. What do you need to know when working with today's breed of BGAs? And when do you know that it's time to leave a broker? The articles on the following pages will help you fine tune your interaction with a broker -- interaction that can easily make or break your business.
Christina Pellett is managing editor of the Agent's Sales Journal. For more information on these and other studies, please email ASJeditor@AgentMediaCorp.com or call 800-933-9449 Ext. 226. Inquiries and comments may also be sent through www.AgentsSalesJournal.com.
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