Filed Under:Life Insurance, Life Products

Fraternals: A valuable partner for producers

Are fraternal benefit societies still relevant?

Despite some common misconceptions (secret handshakes, "Grand Poobah" hats, and stodgy lodge meetings), fraternal life insurers and their 9 million members make a $3 billion contribution to our nation's social and economic health each year.

That's a relevant benefit not only for fraternal members -- but also for the individuals and organizations supported by fraternal benefit societies in communities across the country every day.

Fraternals, created over a century ago, were originally meant to help the United States' burgeoning number of immigrants unite through their common bonds -- primarily ethnicity, religion or occupation -- to solve common problems. One of the most significant of those problems was securing their families' financial futures in the event that the breadwinner died.

These new Americans -- operating without a government safety net and precluded from purchasing insurance through traditional channels -- literally passed the hat to make sure the survivors of working people were taken care of in the event of a loss.

Over time, fraternals evolved with the changes in American society. Their members became more successful and grew into the nation's middle class. The creation of government programs like Social Security, Medicare and Medicaid, combined with employer-sponsored health and disability insurance programs, lessened the need for fraternals to take care of their own.

Fraternals responded by marshalling their collective resources to take care of others who needed a helping hand. Today, fraternal life insurers represent nearly 9 million individuals who are organized into local chapters, making them some of the largest, most efficient volunteer networks in the nation.
Fraternal members are adept at filling the holes in the government safety net.

Each year, members invest more than 91 million hours (worth about $1.7 billion) in volunteer projects -- almost all of which are focused on the needs of the local communities in which members (and agents) live and work. These include food banks, homeless shelters, disaster relief, military veteran assistance and educational scholarships. In addition, fraternals contribute more than $400 million each year to charitable programs supporting community service projects.

Fraternals, with more than $363 billion of life insurance in force, also are playing an increasingly important role in securing their members' financial futures. In 2009, fraternal life insurers paid $3.3 billion in life insurance, $4.6 billion in annuity, and $475 million in accident and health benefits.

Some fraternals also work with their agents to provide financial education programs to help their members become better-informed consumers and more adept at developing a comprehensive plan to secure their families' financial futures.

Evolving fraternals re-brand
Millions of Americans believe in fraternal bonds, so my organization's leaders are investing in the future of the fraternal system. We recently took a new name (American Fraternal Alliance) and identity (a logo with representations of three stars signifying the individual, the community and society -- the three key elements in the organization's mission and vision statements). Stars also are a respectful nod to the patriotic values of many fraternal Americans, past, present and future.

The American Fraternal Alliance's new tagline -- United in service and financial security -- is based on the fact that fraternal benefit societies use revenues from the sale of insurance products to support local volunteer efforts.

Revamping our brand clarifies and amplifies the strengths that fraternals provide to their members and to the individuals and organizations their volunteerism supports. We're out to let legislators and regulators -- and the country at large -- know the good that fraternal benefit societies deliver.

Organizations rely on producers
Fraternals market their products through captive agents and independent producers. Many smaller fraternals are utilizing independent producers who share the organization's common bond and values to reach niche markets within an agent's community. Fraternals can fill an important role in an agency that is seeking to expand its presence with middle-income consumers (who are still the majority of fraternal members) and enhance its image as a leader of community service activities.

Fraternals and independent agents make a good match because life insurance producers and financial planners are often pillars of the communities in which they live and work. So too are local members of fraternal benefit societies. Producers can access fraternal benefit societies to satisfy local niche markets (religious groups, professional groups and others), especially if the insurance professional shares such a common bond.

Good works and good business go together. Insurance producers -- just like fraternals -- throughout the country are committed to their communities. Producers can join existing fraternal volunteer service projects, or ask fraternal members to support theirs. And by support, I mean financial: fraternals provide funding in the tens of millions of dollars for volunteer and service efforts across the country.

There's no patent or trademark on altruistic efforts, and every community I know of can use involved, active volunteers. That's what fraternal benefit societies have done for decades in this country. With our new identity, we'll continue doing that while making our work better known.

Joseph J. Annotti is president and CEO of the American Fraternal Alliance, a nonprofit trade association representing 70 fraternal benefit societies. He writes a blog at the organization's Web site, www.fraternalalliance.org.

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