NAILBA/Agent Media study examines producers' everyday business, BGA relationships
Proposed Rule 151A. A federal bailout. The possibility of an optional federal charter for insurance. An attack on senior designations.
It's not been an easy year for those in the insurance industry, a field typically plagued by negative media attention and much maligned by outside critics. In addition to common general challenges with prospecting and marketing, agents had to contend with skyrocketing premiums and tighter wallets. Health care reform was thrust into the spotlight by the presidential election, and several major long term care insurance companies raised their rates.
But in the face of mounting pressure, agents around the country continued to do what they do best -- provide consumers with the safety and security that can only be found with an insurance policy.
To examine the selling habits of producers and their relationships with their independent brokerage agencies, Agent Media (publisher of the Agent's Sales Journal) and the National Association of Independent Life Brokerage Agencies (NAILBA) partnered for the third-annual Brokerage Study.
We found many agents had seen their commission income drop, and more producers than ever before believe they'll continue to do so. Renewal commissions and cross-selling also took a slight dip. But agents are also drawing closer to their primary brokerage agencies and spending more time prospecting -- will that pay off in the months to come?
Following are highlights from the study, along with commentary from agents and BGAs on the trends and habits that shape their everyday businesses.
A tougher job?
Just over half of the agents surveyed this year said their commission income had increased in the past 12 months, with 24 percent saying it's decreased -- a jump from last year's 14 percent. (Chart 1)
"With the economy as it is, money [being] short with the common man, and work in manufacturing slowing to a snail's pace, people are just not buying insurance products they consider expendable," said one agent from Hickory Flats, MS. "Several of my clients have cancelled policies due to being laid off work or short work weeks. I can understand how they feel because I still work in manufacturing and do insurance sales."
Another agent from Auburn, AL said he will have to adjust his selling habits to accommodate his own dip in income.
"I am having to change my marketing to be able to keep the same income range," he said.
Agents we spoke with said that while commissions have indeed decreased for them, higher premiums on most policies have actually resulted in a steady income. But still, with fewer agents showing optimism than in years past -- 81 percent predict their commission income will increase in the next 12 months, compared with 88 percent in 2006 and 2007 -- the question becomes, is it harder to be an agent today than it used to be? (Chart 2)
David Propst of Ormond Beach, FL has been an agent for a little over 20 years and said his job has certainly become more difficult over time. He's found that having a variety of products to meet all of his clients' needs and working with a brokerage agency, however, have helped.
Barry Cogdill of Business Choice Insurance Services in San Diego, CA has been in business since 1992 and also said his job is more challenging than it was in the past, largely due to increased premiums and reduced commissions. He said he has great hopes for the industry but believes that, for now, more "exotic" policies will take a backseat to traditional coverage.
"Would I encourage my kids to do what I do?" he asked. "Only if they wanted to, but I certainly wouldn't discourage them from doing it."
California agent Linda Friedlin has been in business for 20 years, and in the past five years especially, she said she's noticed the market getting softer, especially this past year. Despite that, she said, she has seen growth.
As for her prospecting efforts, she said, they seem to be paying off as she has a very strong referral-based program. Still, stiff competition and a steeper learning curve are challenging for agents such as herself, she said.
"You can't just call up and say, 'I have a better premium than the other guy,'" she said. "So those of us who know what we're doing will succeed, and those who operate solely on price are going to have a harder time."
Friedlin isn't the only agent making heavy use of referrals -- far from it, with 62 percent of producers naming it their most effective method of prospecting.
And prospecting certainly is not an easy task. It's the No. 1 challenge faced by agents (67 percent), followed by clients not recognizing the need for insurance products (28 percent), getting a product through underwriting to issuance (25 percent), consumers' negative perception of the insurance industry (22 percent), and getting products issued for clients with substandard health (17 percent). (Chart 3)
Products and clients
The most popular product among agents is life insurance, with 24 percent indicating that the product accounts for the majority of their total annual commissions and 76 percent counting term life insurance among the products they've sold within the past 12 months. Twenty percent of agents each said annuities and health insurance make up the majority of their income.
This year also showed a trend toward serving older consumers, with most agents selling the most insurance/financial products to those in their 40s and 50s (34 percent and 31 percent, respectively). Nineteen percent, however, sold mostly to those in their 60s, whereas in 2007 that number was only 13 percent. (Chart 4)
And more producers are selling to female clients. For 23 percent, more than half of their insurance sales are to females. In 2007, that number stood at 17 percent.
"The majority of financial decisions
in households are being made by females," said Doug Mishkin, managing director of the brokerage firm Algren Park Avenue Brokerage LLC and current chairman of NAILBA.
"Males have very little, if any, input in the final decision, and these statistics definitely show that."
Technology and your business
For the first time this year, we asked agents how they typically use the Internet in their day-to-day insurance business. More than one-third (38 percent) said they submit client applications to their insurer online, and 31 percent use the Internet to follow industry news.
Sixteen percent research companies they're interested in doing business with, 9 percent market their agency with their own Web site, and 7 percent network with other insurance professionals using social networking sites, discussion forums, and other non-email methods of communication.
As for the basics of technology, most agents appear to be making use of email (95 percent), cell phones (92 percent), fax machines (86 percent) and personal desktop computers (74 percent). Fewer agents use company Web sites (61 percent), PDAs (28 percent), and laptops without wireless capabilities (11 percent).
Cogdill said in his business in particular, the growth of the Internet has begun to supplant traditional marketing activities such as direct mail, requiring the use of more tools such as online quoting systems to accommodate the large volume of prospects who turn to the Web to find agents and coverage.
"As the Internet has come along, obviously every agent has to be savvy enough to have a Web site presence," Cogdill said. "You don't have to be at the top of Google, but you need to have a place to send people."
Surprisingly, fewer agents this year seem to be attending insurance-related online events such as Web conferences and webinars -- 77 percent compared with 82 percent in 2007. Gary Dworkin, president of the brokerage general agency Dworkin Associates Inc. and chair-elect of NAILBA, said he believes that's because webinars were overused by companies that took the opportunity to simply promote their business without providing direct value.
"I think it was the new toy," he said. "In a number of cases, we seized on it, and some companies created webinars for everything, including, 'Our waiver rates are better.'"
Working with brokerage agencies
Agents appear to be much more loyal toward their brokerage agencies this year, with 44 percent indicating they are very unlikely to move their business to a new BGA (compared with 39 percent in 2007). (Chart 5) Thirty-two percent have not contacted a new brokerage agency in the past 12 months to inquire about their products, services, or support, and 69 percent intend to look beyond their existing BGAs in the next year. In 2007, agents appeared more likely to shop around, with 74 percent having contacted other BGAs between 2006 and 2007 and 75 percent intending to do the same in the future.
In addition, 52 percent found their primary BGA's sales support very useful, compared with 46 percent last year.
Dworkin said the numbers point to a positive trend within the independent brokerage channel, one driven by a range of client needs that can only be served by the diversity offered by a brokerage agency.
"Now more than any time in our history, no one size fits all," he said. "It would be foolish to suggest otherwise."
That viewpoint is echoed by agents. Thirty-one percent write a combination of two product lines through their primary brokerage agency -- either life insurance, health insurance, annuities, or long term care. Thirteen percent write three of those, and 19 percent write all four through their BGA.
Producers also emphasize the importance of choice when asked about the value their BGA holds. Access to multiple carriers/product lines is the most important service their brokerage agency provides them to support their insurance sales, and 33 percent said that their brokerage agency terminating a relationship with the carriers their customers need would be most likely to cause them to stop working with their primary BGA. Ninety-three percent said access to products that meet their clients' needs is an absolute must-have Mishkin said this unique benefit -- choice -- is sure to continue to drive the growth of the independent brokerage channel.
"I think that the brokerage distribution [channel] has become the primary distribution of the insurance industry," he said. "NAILBA's membership is the highest it ever has been, which I think is a direct correlation to the growth of the brokerage industry."
Christina Pellett is managing editor of the Agent's Sales Journal. She can be reached at 800-933-9449 ext. 226 or ASJeditor@agentmediacorp.com.
More Coverage:
Habits by Commission
Selling Habits
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