Working with New Life Distribution Channels

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Working with New Life Distribution Channels
Steve Parrish, JD,CLU,ChFC,RHU National Advanced
Solutions Consultant February 23, 2007
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Before

• The market
• The right thing to do
• Vertically integrated
• Money
• Savings regulated no money market
• Mutual funds limited
• Life Insurance
• Rate book whole life
• Term

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Before

• Distribution
• Debit
• Career
• Other multiline, Fraternals, and brokerage
• Commissions
• 50 12 5 renewals
• Limited Bonuses

4
Events Reflective of Trends in the Life
Insurance Industry
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Now

• Underinsured middle class
• Open investment markets
• Policies
• UL, VUL, Private Placement
• Traditional
• Term
• Hybrids

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Now - Distribution

• Career
• Brokerage
• Rollups
• IMOs
• Other
• Banks
• Wirehouses
• Worksite
• Financial Planners

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Trend Sales Through Independent ChannelsGrowing
Faster

• Traditional channels account for nearly 90
  percent of life sales.
• 2004 was a record year for life sales through
  stockbrokers and banks.

Source LIMRA International, Inc
8

• Key Trend
• Recruiting inexperienced agents continues to be
  critical to the sale of insurance products. And
  if recent trends continue the industry is heading
  into a very challenging period.
• More than four out of five independent agents
  started their career as an affiliated agent
  (career or multi-line).
• More than half of independent agents are age 54
  or older.
• Career agents on average broker 24 percent of
  their business.

Source LIMRA International, Inc
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Home Office / Manufacturing

• Varied Integration (product, distribution,
  processing)
• Stock versus Mutual
• Regulation (State, NY, OFC, NASD)
• Accounting (Stat, GAAP, RBC, etc)
• Distribution (owned, separated, mixed)

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Independent Channels

• Key Trends
• Independent channels (independent agents,
  wirehouses, regional BDs, IBDs, IFAs/IFPs, bank
  reps) are growing faster than career channels and
  taking share.
• Intermediaries (e.g., BGAs) consolidating market
  power and displacing carriers from large parts of
  the value chain by offering value-added services
  to third party reps.
• Independent channels forcing carriers to compete
  for shelf space and sales with more attractive
  commissions, pricing, and product features.
• Independent channels generally offer lower
  quality business (e.g., persistency, non-taken
  rates) and are quick to exploit errors in product
  design (e.g., mispricing, product features.)
• Key Imperatives
• Align incentives to carrier profitability.
• Tier service and wholesaling support.
• Find ways to add distinctive value to channels.

Source LIMRA International, Inc
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Independent Channels Growing Faster

• Variable cost structure and faster sales growth
  are two of the major reasons carriers have
  shifted to independent distribution.

Source LIMRA International, Inc
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Independent Channels But, Affiliated Agent
Channels Still Considered More Profitable

• Competition in the independent channels is very
  keen and, hence, profitability of new business
  through these channels is strained.

Source LIMRA International, Inc
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Life in the Field

• Field Management
• Owned versus managed
• Wholesaling
• Agents and Brokers
• Compensation
• Office
• Internet

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Marketing

• To the Producer
• The wholesaling revolution
• To the Advisor
• To the Consumer
• Producer versus institutional marketing
• Advertising
• Other geodemographics, cobranding

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Sales

• NEEDS
• Death benefit versus living benefits
• Taxes
• Gimmicks and garbage

• SALES PROCESS
• Location
• Submission, underwriting, delivery, etc
• Compliance

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Some Thoughts Primary Challenges in the
Marketplace

• Delivery (particularly middle markets)
• Process
• Training
• Regulatory

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Some Thoughts Whats Your Model?

• Who is your primary Customer?
• Productivity (primarily Career)
• Shelf-space (primarily Brokerage)
• Training, Promotion, Support services

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Some Thoughts Common Myths

• Agents are dumb
• Agents are rich
• Agents are unethical
• Agents dont work hard

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Some Thoughts Working with Producers

• Remember how they are paid !!!!
• Yes
• No
• Maybe

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Some Thoughts How to Learn More

• Shadowing
• Interviewing
• Buy something

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From Theory to Practice
Source LIMRA International, Inc
22
Point-of-sale Support Align Services With Agent
Needs

• Provide best offering by excelling in a specific
  value and maintain threshold standards on other
  aspects of value. Discipline of Market
  Leaders, Michael Treacy and Fred Wiersema

Source LIMRA International, Inc
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Point-of-sale Support Align Services With Agent
Needs (cont.)

1. Advanced sales support in specific areas such as
   tax advice, estate planning
2. Administrative support to help you with
   processing sales
3. Administrative support to help you with servicing
   your clients
4. Consolidated statement reporting for each of your
   clients
5. Contact management software or systems
6. Electronic submission of applications (other than
   fax or e-mail)
7. Lead generation support
8. On-line access to client records
9. On-line or automated access to application status
10. On-line access to commission reporting
11. Product training
12. Practice management training
13. Sales training
14. Support in leading client seminars
15. Sales and marketing material

Source LIMRA International, Inc
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Third-Party Channels Imperatives
Tune the service and support offering based
on channel needs.
Consolidated statement reporting for each of
your clients
Online access to client records
Sales and marketing material
Online access to commission reporting
Advanced sales support in specific areas such as
tax advice, estate planning
Admin support to help you with servicing your
clients
High
Online or automated access to application status
Product training
Admin support to help you with processing sales
Electronic submission of applications (other than
fax or email)
Maintain to Retain
Diminishing Returns
Support product specialists to close sale
Contact management software or systems
Satisfaction with Service Received
Sales training
Practice management training
Distraction
Differentiator
Support in leading client seminars
Low
Lead generation support
Low
High
Source LIMRA International, Inc
Criticality
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Thank you
Questions?