At the end of last year, LifeHealthPro and Retirement Advisor asked independent producers about their successes and failures, about the policies that defined their practices, about the products their clients found exciting and relevant. One thing became clear: The opportunities are vast, but the challenges are mounting. Being successful as an independent agent in 2014 means being adaptable and intuitive. It requires creativity, digital savvy and a constantly evolving knowledge of the regulatory environment.
Your peers are ready. Are you?
1. Health care reform (28%)
It’s been top of mind for four years, but with the exchanges finally open , health care reform is the No. 1 challenge advisors say they are facing right now. Part of this can be attributed to the haphazard way in which the exchanges were launched, with massive differences in plan offerings and price from state to state, technical access to enrollment options shaky, and many questions still unanswered. Carriers have also lowered commissions in response to the MLR legislation, which means long hours may yield low pay.
And then there is the larger concern that the plans offered under PPACA simply do not meet consumer needs — and are unsustainable for insurers to boot. In response to a recent PwC survey, which trumpeted that premiums were lower on the exchanges than in employer-based plans, Lloyd Lofton shared his concerns: “Marketing a higher deductible health plan so that premiums appear lower for features the consumer doesn't want, while masking the increased out of pocket exposure for the consumer with tax subsidies (which the consumer ultimately pays for through higher taxes), does not mean the premiums on the exchange are less. In a free market, a business designs a product based on market research and what the competition is doing; they price the product to be competitive and let the market decide [if the product is worthy]. Here, the product is mandated, so the manufacturer (the insurance carrier) prices based on mandated benefits, not on what consumers want.
This can be proven by two facts: First, the law provides subsidies for the consumer based on income, meaning the government knew these mandated benefits the consumer would not want would also be unaffordable without the subsidies; second, the law allows a bailout for insurance companies for several years due to expected loss ratio, because the government knows mandated benefits and government control of the marketplace will not be profitable for the insurance companies. What is not understood is the reason people buy health insurance. It is not for their best health year. It is for their worst health year, and that’s why the private market worked, because that's what people planned for.”
2. Lead generation (26%)
Leads alone are not enough to carry a business. But an effective lead generation strategy is enough; in fact, it’s a gold mine. The digital age has ushered in a host of new tools that can make collecting and following up on leads simple and effective: social media, digital databases, paperless applications. Alongside standout client service, these tools can make it easier to get and keep appointments with prospects that match your ideal client profile.
Bruce Carlton, CLU, VP of marketing for iGROUP, shares why social media has worked for him — and why tone is everything: “Consumers want to be educated to make an informed decision ... not sold. First, embrace social media. This is where everyone is hanging out. Your profile should be relevant and should address problems you can solve versus promoting your company or products. Second, post frequently using excerpts from third party material. The third party piece adds credibility. Taking this approach positions you more favorably than a policy peddler.”
3. The economy (20%)
Sitting just slightly behind those twin behemoths of health care reform and lead gen, the economy ranked high on the list of challenges advisors are facing. With consumers still recovering from years of instability and many gun-shy about spending, closing the sale comes with challenges that didn’t exist in the flush 90s and early aughts.
But this challenge is also a reminder that insurance may be more needed now than ever before. Secure products like fixed annuities have hit their stride; 67 percent of survey respondents noted that they had seen an increased interest in these and other safe products like deferred income annuities due to market volatility. Additionally, the advisor role is expanding to include more holistic education — which, by extension, is likely to mean deeper relationships that last much longer than a single sale. Sixty-four percent of advisors say they have developed more of a teaching and coaching role with their clients since the financial collapse on Wall Street.
4. Industry legislation (7%)
Legislation is being passed more quickly than advisors can keep track, it seems, at both the federal and the state level. Not only are advisors juggling continuous changes to PPACA, they are faced with a number of managerial, financial and market risks that could be industry game-changers. As more large financial institutions are classified as non-bank SIFIs, will bank-centric rules become the industry standard — and, more critically, will they be appropriate in an insurance context? Can smaller companies withstand the aggressive pursuit of unclaimed property by state regulators, or will it cause them to fold? What will rising interest rates mean for the markets and insurance products, and how quickly will they rise? All these are questions that make planning and selling difficult for insurers and agents alike.
5. New technology (5%)
The proverbial blessing and curse, technology has increased productivity according to 38 percent of advisors, but it has also taken away the personal touch (according to 33 percent). Compliance concerns around social media and other digital tools can add to the administrative burden of fully integrating technology into your workflow. But, it is critical that you do so. Ignoring technology means leaving too big an opportunity on the table. Today’s advisor must strike a fine balance between relying on technology to build an efficient and responsive practice, and maintaining a level of service that is customized, personal and meets clients where they’re at.
The good news is that technology does solve a critical industry issue. Today’s consumers, Millennials especially, want answers in real time, answers that offer a customized solution. Distribution models have already begun to change to reflect this; Wal-Mart and other big box retailers began selling insurance last year with some success. It has even been suggested that buyers would consider Google or Amazon to meet their insurance needs. Why? For lower prices and more personalized service, of course.
In response to this trend, one reader shared thoughts on the opportunity that may lie ahead: “I have been a manager with one of the very largest P&C carriers for over 25 years. Over 24 percent of the customer complaints our company receives are that ‘my agent won't call me back.’ My suspicion is those clients who perceive poor service from their agent might be very open to alternative methods of buying insurance.”
The solution? Embrace the tech tools that will allow you to increase your response rate and meet the changing demands of consumers. Happy clients, booming practice. Sometimes, it really is that simple.