A Disintermediation Storm Is Brewing For Life Brokerage MGAs
Theres a storm coming in the life brokerage distribution channel that could wipe out every General Agent and Managing General Agent. Perceptive MGAs can hear it in the distance. As Ross Perot used to ask when he was running for President, “Can you hear that great wooshing sound?”
That sound is the buzz inside many savvy life insurers as they build their direct sales capabilities and their “concierge” level of service for their top independent life producers and financial planners.
Theres also a buzz from their efforts to build world-class wholesaling capabilities to work directly with banks, wirehouses, broker/dealers, and large property/casualty organizations.
Theres a buzz from their beefed-up marketing departments as they study and segment end-customers and their life-cycle needs.
And, finally, theres also a buzz as these forward-looking life insurers build their capabilities to work directly with financial planners and advisors.
Future-looking life insurers are hiring consultants, revamping, and hiring key talent for their marketing departments to solidify their positions in the future. They know they have to be customer-focused. They know they have to provide real value to key producers in a fashion that will help these local entrepreneurs continue to grow their businesses profitably.
These life insurers are becoming better at multi-channel management. And, they know they have to provide these value-added services profitably in an environment of intense competition from both traditional and non-traditional competitors.
The ominous buzz that some perceptive MGAs hear is the sound of the emerging capabilities and initial successes of these life companies. And, this buzz is the precursor to a severe storm that will blow away any GA or MGA that doesnt add real and perceived value to a core group of segmented broker or institutional clients.
Additionally, to make things more difficult, this real value has to be added in an environment of lower margins, fewer soft dollars, and increased value given to large national distributors at the expense of regional and local firms.
And, like a tropical hurricane, this storm can quickly destroy any wholesaling and brokerage business that is not both a low-cost operation and an organization that either brings new clients or warm leads to its brokers; that does not help life producers grow and manage their businesses in cost effective and sustainable ways; that does not increase the sales productivity of life producers; that does not help life producers create a strong local franchise; and that does not help them service their end clients in a seamless way that can lead to repeat sales, more focused in-force marketing, and also strengthen their relationships with their clients.
In short, golf outings, lunches, reward trips, high initial commissions, forms, illustrations, and product information are no longer enough. These have become “table stakes”–necessary to be in the game but not enough to win when the storm starts to intensify.
Perceptive MGAs and brokerage aggregator organizations are starting to take action. They have begun the necessary and often painful “behind the scenes” work of integrating and rationalizing the “back office” function in the life brokerage business. This is made difficult by the plethora of incompatible systems that non-scale technology vendors are offering and by the lack of cooperation among life insurers in the areas of applications, new business standards, and forms.
But this important first step will only improve the efficiency of back office operations. However, customers (i.e., the broker or institution) dont care about all the work that went into your back office: they expect a seamless new business process and to get paid fairly and quickly. They dont–nor should they–care about how much it costs you to process their business.
But they care deeply about the future of their business. What they need are: