Insurers Should Give Thought To Modifying DI For Non-Traditional Sales
By Norse N. Blazzard and Judith A. Hasenauer
The protection elements of the more traditional life and annuity products often tend to be forgotten as the industry increasingly turns towards distribution through non-traditional producers such as stockbrokers and banks.
As the insurance industry moves into the new millennium, this will need to change. Well see why after reviewing where things are now.
In the past few years, many new insurance products have emphasized tax efficiency, fomenting great interest in the industrys various “accumulation” products. Often, this has resulted in producers excluding the more “bread and butter” productsones long the backbone of the “protection” side of the businessfrom their sales presentations.
Few banks and stock brokerage firms even offer products like disability income insurance, for instance. Nor do these marketers emphasize the sale of such insurance.
As a result, consumers of these marketers often remain unaware of their crying need to protect themselves from the financial ravages of inability to perform their usual employment duties.
Further, most non-traditional sellers of accumulation insurance products seem to have no interest in, nor responsibility for, assisting customers with insurance products (except for accumulation products that most closely parallel the investments that are their primary area of interest). Unfortunately, this means their customers have little opportunity to become informed about the other insurance products that are so important to assuring financial security.
In addition, most non-traditional sellers perceive themselves as having no expertise in the underwriting of pure protection products. Hence, even if producers in such channels are convinced they need to offer protection products, few of their employers have the facilities to support that or the understanding of what is necessary to do so.
Compounding matters, most insurers do not have a marketing staff that makes protection coverages available to these non-traditional distribution organizations.
Of course, the insurance industry has developed very sophisticated and very effective wholesaling networks to market accumulation products through stock brokerage firms and banks. However, few if any of these wholesaling networks are involved in promoting anything but accumulation products.
Indeed, most wholesalers who run these networks are themselves products of selling accumulation products on an exclusive basis. They have little or no expertise in, or experience with disability income coverages or other “protection” products.
Now, lets look ahead. The life insurance industry has a number of goals to accomplish in this new millennium. Increased longevity will make insurance protection even more important than it has been in the past–and this includes not only life insurance and annuity protection, but also protection against financial losses due to disability and even long term care.
The industry cannot overlook the fact that a person is many times more likely to become disabled during a working career than to die.
Therefore, the life insurance industry has a challenge. It must modify its products and distribution systems to expand the types of products offered to consumers through banks and stock brokerage firms.
Conventional wisdom suggests that stockbrokers and bank employees will never be able to sell traditional insurance effectively. This is because traditional insurance products are so complex, and the underwriting process so slow that it is assumed non-traditional sellers would lose interest in the process and then shift back to accumulation products.
But conventional wisdom isnt always right. As you may recall, for many years, this wisdom held that non-traditional distributors would never be able to sell variable annuities. But today, these non-traditional distribution outlets are the largest sellers of VAs! To help make that happen, the insurers modified their VAs to meet the selling techniques of those channels. This is what the industry needs to do now, with its protection products.
In addition, the industry needs to train its wholesalers to be able to assist with the sale of protection products. If they emphasize only the accumulation products, only part of the publics financial needs will be addressed.
If the industry fails to take the measures necessary to enable the important non-traditional distribution systems to offer DI policies and other protection products in an effective manner, it will be remiss in its obligation to consumers. This obligation is to make sure consumers have access to products and financial services that are necessary to ensure financial security regardless of what may happen.
Norse N. Blazzard, JD, CLU, and Judith A. Hasenauer, JD, CLU, are principals in the Westport, Conn. and Ft. Lauderdale, Fla. law firm of Blazzard, Grodd & Hasenauer, P.C. E-mail at Norse.Blazzard@BGHPC.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, February 25, 2002. Copyright 2002 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.