As history has proven time and again, life insurance sales are about to experience a rebound from a period of economic turbulence. The challenge is how to efficiently leverage this upcoming opportunity. In our current economic and marketing environment, brokerage general agencies (BGAs) are well poised to support the independent producer challenge and will lead the rebound in life sales.
The life insurance industry has proven to be mature, stable and resilient to economic cycles. Chart 1 demonstrates how life sales have been impacted by major negative events in the markets. Although not immune to bear markets, life sales have consistently rebounded from bad times. And, the pattern appears to be repeating itself.
LIMRA research shows that 2010 was the beginning of the recovery from the great recession, with life sales increasing 3% after declining 14% from 2008 to 2009. The year 2011 also showed continued momentum, posting another 3% increase over 2010.
Brokerage life sales have been key to the recoveries and, indeed, have been leading the way in terms of growth, posting a 5% increase in life sales from 2010 to 2011. More life sales are coming from independent channels. Chart 2 shows how the brokerage channel alone delivered 49% of total paid premium in 2011.
BGAs: The engine of growth
The distribution engine driving independent life insurance sales is the BGA. This form of distribution has evolved over the last several years, and today’s successful BGA is a model in effectiveness and productivity. Why BGAs? A lot of their success is attributable to their “back shop” efficiency. It used to be that technology was the cost of a computer and phone. The insurer sent the agent a disk, and voila, an illustration appeared. Now we are looking at myriad software, hardware and network costs that the BGA can deliver far more efficiently.
Consider the technology needs for compliance, comparison of carriers’ illustrations, financial analysis, underwriting preliminaries, electronic submission, etc. Part of the BGA’s efficiency has evolved from its role as the case packager for the writing agent. Many BGAs have internal underwriters to review the case, internal advanced markets staff to triage the case design, and financial experts to perform carrier due diligence. The successful BGA is the one that helps the agent end up with the right design with the right carrier the first time.
See also: Committed to the Career Channel
Beyond the back shop, many BGAs are providing differentiation for the agent. For example, some agents are using the branding of the BGA. The agent “hitches his wagon to a star” by marketing the name brand and resources of a large, respected BGA. The agent may also leverage these resources by involving the agency’s resources in point-of-sale activities. Because of technologies, such as webinars and Skype, point-of-sale support can be offered from a distant location. The key to making this work is for the BGA to treat the agent as the customer. Each agent has his or her own way of doing things. To appeal to that independence, the BGA must offer multiple services. These services must be responsive and timely. Responsiveness can be achieved by setting up teams of resources (wholesalers, underwriters, compensation, etc.). Timeliness can be maximized by use of technology (electronic delivery, just-in-time statements, etc.).
Elements for continued success
Consider the history of BGAs. In past decades they primarily offered substandard underwriting. When an agent’s primary carrier wouldn’t offer coverage, the local BGA offered outlets to help place the case. The modern BGA offers far more services and considerably more differentiation. The big difference in today’s insurance industry is that BGAs are far more accepted by both agents and carriers. Rather than working around the fringes of life sales, the BGA is a core deliverer of life sales and service. Agents often affiliate directly with the BGA. Home offices solicit the business of BGAs rather than treat them as outliers.
In fact, the BGA model is poised to become part of the answer to the recruiting challenge in the industry. BGAs are looking at other industries for ways to add talent to the pool of life producers. Whether in pharmaceuticals or bonds, there are other industry examples of ways to recruit and grow successful sales professionals.
Some BGAs have either recruited to or used as centers of influence other financial service businesses. They offer their products and services to owners of P&C agencies, benefits brokers, independent broker dealers and wire houses. With the squeeze to P&C margins, the challenges to selling health insurance and the disappointing equities market, life insurance is an attractive product for sales professionals. The BGA presents a way for these proven salespeople to offer products without sacrificing independence.
See also: Facing Up to an Aging Producer Workforce
Another growth opportunity is in the professional services area. With the changes to estate taxes and the estate planning market, professionals are seeking ways to remain relevant to their clients. The impressive growth in the business market is an example. The professional who helps the business owner not only with his or her wealth, but also with the business itself is the professional who retains a key client. And, in many cases, life insurance is the tax-advantaged funding tool that provides the solution. Attorneys and accountants have transitioned from being merely centers of influence for agents to actually becoming agents. For that matter, many BGAs are former practicing attorneys and accountants.
Success happens when the BGA puts itself in the agent’s shoes. Complexity is a major concern for the agent, and the BGA can provide the resources to manage the complexity of our industry. Take, for example, product. A BGA can offer objectivity, specialization and diversification. And it can help the agent understand how underwriting and advanced markets concepts factor into the choice of product. This helps save the agent the time of analyzing various carriers’ products, financials, compensation and other influencing factors. Additionally, the BGA is uniquely positioned to recognize the agent for his or her total success — not just the success through one carrier. Incentive trips, awards and even compensation are ways the BGA provides holistic recognition for an agent’s accomplishments.
In an environment where the life insurance industry is poised to grow, the writing agent needs help. Questions that challenge the writing agent include:
• How can I be a better case underwriter, advanced market specialist and presenter?
• How can I be paid and recognized for my total production — not just production per carrier?
• How can I use my time efficiently, so that I spend more time with my client and less with my back office?
Success occurs when the BGA helps the agent answer these questions.
For more on independent distribution, see: