And, the Distribution Winners Are
Captive insurance agents, long the key distribution channel for most traditional life insurance policies, now account for less than half the premiums paid, a new study by Conning Inc., the Hartford, Conn. research firm, reveals.
The big winners in the distribution sweepstakes are independent producers, and their control over life distribution likely will continue to grow enormously in the years ahead, Conning concludes in a new report, “Life Distribution Goes Independent: Succeeding in the Post-GLBA Environment.”
The title refers to the state of the insurance industry after passage in 1999 of the Gramm-Leach-Bliley Financial Modernization Act, which made it easier for banks and other financial firms to get into the business.
Many captive agents, Conning notes, find themselves competing not only with independents and banks but also with financial planners, lawyers, CPAs and other professional advisors.
A life distribution survey recently completed by Conning found that production by captive agents declined to 21.5% in 2000 from 29% of new premiums in 1997.
[This figure is well below the 49% share reported by LIMRA two years ago for captive agents, a difference due partly to differences in the mix of companies in the two surveys, Conning says.]
Conning found that 42.7% of new premiums in 2000 came from independents, up from 36.8% in 1997.
It notes that many captive agents terminate their relationship with their primary insurers to become independent agents or representatives of banks or other financial firms.
The study also notes that insurers are scrambling to sell their products through agreements with banks–entities that only a few years ago they saw as competitors.
Although banks have so far captured only about 2% of new life premiums, they also appear to have the greatest potential of any channel for growth, the report suggests.
“Banks have preferred access to a customer base that can be segmented easily, based on readily available financial information . . . and they also have the financial resources and intellectual capacity to develop that potential,” the study observes.