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If we can land a man on the moon -- and heck, next year marks the 40th anniversary of Apollo 11 -- why can't the life insurance industry finally get through to the vast uninsured and underinsured "middle market"? By some estimates, the market may represent up to $17 billion in new premium. Carriers have pecked around the edges for years with different distribution models: banks, stockbrokers, multi-line agents, direct marketing, and hybrid strategies. The life brokerage business, which has become such a powerful force in distribution, is by nature too dispersed across market segments to really crack the code for insuring middle-income households.
What the industry needs is a new approach based on fresh, creative thinking, like the kind Wernher von Braun supplied in the late 1950s and early 60s when he designed the booster rockets that made a moon mission possible. I recently interviewed an insurance veteran who is tackling this with the vision of a von Braun and the determination of the pioneering astronauts: Edward Berube, president and CEO of Futurity First Insurance Group (FFIG), headquartered in Rocky Hill, Conn.
FFIG, launched this past January, bills itself as the life industry's first start-up organization since 1998 to mount a full-scale national distribution effort with private equity capital. It is also the first such enterprise to target the middle-income market, using only career agents, in the classic definition. But they are not a carrier's career agents, as you might expect. They are employed and supported by FFIG and sell only the products of the carriers that FFIG represents. In short, FFIG is a fully independent distributor with a totally captive field force.
"FFIG operates as an independent company," Berube said. "We are not tied to, affiliated with, controlled by, owned by, or financially dependent on any insurance company. Our platform is independent, but our agents work exclusively for FFIG. They receive W-2 income, employee health and retirement benefits, and the same level of career agent support and training provided by the finest career companies."
The organization already has more than 150 agents working in 20 states and is licensed in 17 other states. Berube expects to have up to 30 branch offices open and 300 agents at work by the end of this year. FFIG's five-year plan calls for 3,000 to 3,500 agents, working in 150 or more branches spread across the 48 contiguous states. Such an aggressive plan will require a truly attractive and well-differentiated package for prospective agents, and Berube believes they have built it.
"Our value proposition to the agent is not about offering them the highest commission payouts," he said. "It's having access to a 'best-in-class' portfolio of products and carriers, some unique sales process tools, and a community-based prospect development program. It's the combination of these things that positions FFIG agents to make more money." He added that agents receive "street-level" commissions, plus a monthly incentive bonus.
FFIG branch managers focus on recruiting what Berube calls "savvy survivors," agents with one to five years of insurance experience who have done well enough to know they want to stay in the business. "These are agents who have watched most of the people who they came into the business with fail," he said. "They recognize that they need something more to take their career to the next level." FFIG also pursues "career changers" -- experienced people with strong community ties who leave their current professions and look for a fresh start in a new field.
If FFIG achieves its long-range goals, it will be a testament to detailed planning. Berube's organizational blueprint has all the refinements of an engineer's schematic. It includes five key elements:
1. Exclusive middle-market focus.
2. Traditional insurance sales only.
3. Doing business only through career agents (no brokerage).
4. Distribution only -- no other functions such as product development, underwriting, policy administration, or claims processing.
5. Fully independent platform.
"We define the middle market by income and attitude, more than assets or net worth," Berube said. "Hard-working Americans, ages 45 to 75, with household incomes of $40,000 to $200,000 fit our definition. It's pretty broad. But the key to our middle market focus isn't how much these people earn or are worth, it's what kind of future they want for themselves and their families."
The FFIG sales process wraps around five fundamental life events: death, retirement, accident and sickness, chronic illness, and disability. "Those are the life events that create the most financial insecurity in our marketplace. Most people in this market are overwhelmed at the thought of doing a comprehensive plan to deal with all those areas at the same time. So in the discovery interview, we determine which of those five events are the most important to the prospect today.
"We want to build a long-term relationship with the customer, so we look at each life event on a stand-alone basis, with a needs-based approach. For any one household, maybe three of the five are important. We take them one at a time as opposed to doing a comprehensive plan. This process appeals much more to the middle-income person who doesn't want an 80-page report that sits on their coffee table. They want us to deal with them simply, straightforwardly, without frills, in a language they can understand."
The FFIG product portfolio consists of life insurance (whole life, universal life, and term), long-term care insurance, disability income, Medicare and major medical products, and fixed annuities. Conspicuously absent from the list are any variable products, mutual funds, or other investments. "We're in the security business, not the securities business," Berube noted. FFIG has filed an application, however, to establish a broker-dealer so that FFIG agents and branch managers who are already securities licensed can continue to service their existing securities customers.
Berube developed the FFIG business model and strategy based on his experiences over a 33-year career, most of it with CIGNA/Connecticut General, AIG, and Bankers Life & Casualty. He spent the first 17 years as an agent and a branch manager and later served as a home office executive. "I've worked primarily on the career side of the business, and really learned about it and the middle market at AIG and Bankers," he said.
The big names in life insurance already include a lot of alphabet soup -- AIG, ING, and CNA come to mind, not to mention associations like MDRT, NAIFA, and AALU. One day we may look up and find FFIG on that list, too.
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November is National Long-Term Care Awareness Month. The American Association for Long-Term Care Insurance (AALTCI) launched this event in 2001, and has backed it with some nice client marketing materials, all free for producers at the organization's Web site, www.aaltci.org.
"We are going to heighten consumer awareness during November through a national ad effort as well as local television and radio appearances across the country," AALTCI Executive Director Jesse Slome said. Last year, LTC Awareness Month gained a little more prestige with the passage of a resolution in the U.S. Congress recognizing the event -- one more step toward alerting American consumers to the need for insurance, rather than taxpayer dollars, as the answer for long-term care financing.
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Like a communicable disease, this fall's crisis in the financial markets has infected the balance sheets of life insurance companies. Unrealized market value losses, pressures on liquidity, and reduced financial flexibility are keeping home office executives awake at night.
"We expect to revise the ratings or outlooks on several life insurers in the next few months because of the impact of these challenging macroeconomic conditions," stated Standard & Poor's in an Oct. 10 report. Fitch, meanwhile, revised its global insurance rating outlook from "stable" to "negative" on Oct. 16, noting that its greatest concern is "declines in the market value of investment holdings that have led to significant declines in economic capitalization and profitability for many insurers."
The good news is the ratings services believe the industry can weather the storm. As S&P put it in their report, "Although short-term pressures are significant, the industry's long-term fundamental strengths remain intact."
