How Hancock Is Managing The Multichannel Challenge
How does a company with a career agency system and a bank channel avoid channel conflict?
While I wouldnt say John Hancock hasnt experienced any such conflict, I think weve done well minimizing potential problems. We are at a point where we are identifying and beginning to leverage the opportunities inherent in a strong multichannel distribution system, including banks and agencies.
Ten years ago, Hancock decided we would be wherever consumers were buying financial products. Key goals were first, to emphasize our role as a manufacturer of financial products that customers could rely on to meet their insurance needs and, next, to aggressively expand distribution.
In 1991, 5,000 insurance agents sold John Hancock products. By 2000, the number had increased to 66,000 across all channels, including agents, banks and broker/dealer firms, with potential for further expansion. We also developed an online portfolio of products for consumers who choose to buy directly.
During this period, Hancock experienced growth in all distribution sales channels. A number of critical success factors enabled us to execute this strategy. Perhaps the most important is that our retail sales operation–including channel management, product development and process development–reports to one individual who oversees all the channels and communicates a common vision.
Channel managers meet regularly to work toward the shared goal of allowing issues and cross-channel opportunities to be explored and capitalized on.
Weve also debunked the myth that new distribution channels hurt agency sales. Weve clearly communicated the benefits that the agency system can expect from the additional brand exposure and increased referrals, as channels try to fit the client to the appropriate level of service.
Part of this process involved recognizing that most consumers select the channels through which they purchase. There is less vying for the same customer than might be expected because todays financially sophisticated consumers decide where and how they want to make purchases and investments.
With a multi-channel distribution strategy, whats important from the agents viewpoint is not so much which channel consumers buy from, but that they trust and buy Hancock. This means they feel they can rely on the company and its products.
This strategy has sustained growth with both agency and bank channels. In the past few years, our insurance sales through banks have doubled year over year. Helping to drive the success have been the demographics of the bank customer and the fact that agents are moving toward financial planning, which fits well with the need for insurance products.
The bank relationship naturally extends to the discussion of the consumers financial needs. To meet this opportunity, banks are looking for quality insurance products they can offer to provide value and enhance customer relationships. Much of the time, traditional insurance solutions will fit the bill, and bank financial professionals, supported by Hancocks wholesaling team, handle the sale.
At the same time, our career agency system has been faced with an increasing number of individuals who need more sophisticated insurance solutions. Gross agency production has increased substantially in the past few years. To grow their business in this environment, many agents have successfully complemented their traditional insurance sales function with a more consultative, advisory focus, dramatically growing fee-based revenue.
To expand on this success, weve recently piloted a new model that addresses the needs of the marketplace and leverages the strengths of both channels. In this model, the banks reps sell the full portfolio of Hancocks products, and John Hancocks Financial Institutions Group manages the relationship, with administration provided by the home office.
This is a good match to the centralized structure of the bank. The local agency acts in a wholesaling capacity, adding value to the bank on a local level, providing training, sales support, seminars and representation on joint sales calls. Production credit is shared by the two channels, and all players are fairly compensated.
The model has been introduced on a limited basis with select agencies and banks. The agencies that participate must have an appropriate infrastructure, including a brokerage manager.
So, the agency gets a piece of a sale in which it might not otherwise have participated, and it is relieved of administrative details such as supplying literature and sending product and process update notices.
When appropriate, banks can use this model to satisfy their customers insurance needs, thus building even stronger relationships. They get top-quality insurance products, centralized support from our home office and specialized sales support from the local agency.
It is too early to determine the long-term success of the program. We believe, however, that it will benefit our client banks and our career agencies as well as our company and its shareholders.
Peter Mawn, senior vice president of John Hancock Financial Services bank channel, in Boston, oversees sales of mutual funds, annuities, life and long-term care insurance through financial institutions.
Reproduced from National Underwriter Life & Health/Financial Services Edition, July 27, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.