With the large number of carriers distributing through the brokerage channel, and each carrier having a product portfolio that consists of several different products, it may be near impossible for any broker to fully understand all the products available to his prospective clients, according to those who know the market.
“When you look at the variable annuity market, the challenges that brokers are facing today is product proliferation,” says Charlie Petrizzo, national sales manager for Wachovia Insurance Group, Charlotte, N.C.
Petrizzo explains that he’s been hearing the same message from brokers and at industry meetings. “A lot of people think there’s too much coming out,” he says. “Enough is enough with the riders. There are some great riders, but they mix up the central message of the annuity.”
However, companies continue to develop new products and rider designs to differentiate themselves from other carriers that may be soliciting business from the brokerage channel, industry sources say. And, ironically, the demand for these complex designs are often coming from the field.
“Brokers are always looking for unique product designs,” says Bennett Cooper, a senior consultant with Tillinghast, New York. “People are always looking for differentiation.”
But gaining access to innovative products and actually putting them into use are two different things, notes Bob Wick, a partner at Cramer, Wick and Associates, Davidson, N.C.
“Brokers will ask to have in their portfolio as many products as possible with every state-of-the-art feature available, but they’re going to tend to sell those they’re most familiar with,” says Wick.
“When you go back and look at what is actually sold, you’ll find the basic chassis of the product being sold and not all the new features,” he adds.
Wick feels that in many instances in the brokerage market, product differentiation is a somewhat negligible factor. The product the broker is most comfortable with is the one he will sell, says Wick.
Most industry experts agree that probably more important than special product features and options is the underwriting available.
“Most brokers are looking for creative underwriting service,” says Cooper. Contracting with a number of companies with innovative underwriting programs allows a broker to present the best options available to his client, he says.
In the disability market, Mike Eskra, president and CEO of Eskra and Associates, Coral Gables, Fla., says the first thing they look at is the underwriting. “It depends on what each company’s specialty is,” he says.
“If a guy’s on Prozac, most carriers won’t touch it, but some will–and we’ll go to those carriers to shop the coverage,” he says.
Roger Bozarth agrees with this approach. “What I look for is the best deal for my client, that’s really what it boils down to.”
Bozarth, president of The Insurance Advantage, Orlando, Fla., works with 25-30 different companies. “Each one has a different niche–we have some companies that will issue a table 4 risk as standard.”
Bozarth says the biggest challenge is finding out which companies have these special underwriting programs, and keeping current with their latest developments.
“Its just knowing and keeping up with enough of what’s going on in the marketplace to know which companies to narrow it down to,” he says.
Cooper notes that most brokers will have 2 or 3 favorite companies they’ll do most of their business with. “They develop relationships, they learn those products.
“What you find is they have to pick and choose the carriers they use that are consistent with their market,” he says.
But Bozarth disagrees with that approach. “A lot of guys just don’t take the time to keep up with the marketplace. They like doing business with 2 or 3 companies and that’s fine, but those companies aren’t going to foot the bill all the time,” he says.
Bozarth feels that in order to do the best job for the customer, it is important to maintain relationships with a number of different carriers–each with different specialties.
“If you don’t deal with enough companies, you’re going to get blindsided,” he says.
Bozarth says that keeping tight relationships with company wholesalers gives him the tools he needs to stay informed. Once he establishes a relationship with a carrier, he keeps a direct pipeline of information between himself and the carrier, getting updates on changes, new products, underwriting enhancements, and niches each company is addressing, he says.
“When I get a case in, I go to my niche list,” he says.
Since Bozarth specializes in the senior high net worth market, most of his cases will have some type of health problem, he says. By focusing on this market, he requires these types of carrier relationships to ensure he’s doing what’s right for his client.
Many experts agree that the brokerage market is multi-dimensional, consisting of producers who specialize in different markets, ranging from the high net worth, like Bozarth, to the broker in the wirehouse who “writes a ticket.”
As brokers pursue their own niche markets, they will have different requirements in all aspects of their business, says Cooper. “Different segments of brokers are going to have different needs,” he adds
Some experts feel that simplifying the process a broker goes through to do business with a carrier is a requirement of all producers, and probably more important than many other elements.
“The broker’s going to sell the product where he can pull the kit off the shelf, and fill out four pages–he’s filled them out a hundred times and he can do it in his sleep,” says Wick.
In addition to simplifying the process, a broker needs to be educated on how the process works, he says. Experts agree that this is key for carriers to gain better access to that broker’s book of business.
Bringing more education to the broker will help him better understand the product, and give companies better access to his business, says Petrizzo. “You want the wholesalers out there working with the producer,” he says.
“Its the role of the wholesaler to get the broker comfortable and familiar, not only with the products, but the process as well,” adds Wick.
Bill Goff, a consultant with Tillinghast, Atlanta, Ga., takes this idea a step further. Goff feels that in addition to simplifying the process for the broker, carriers need to simplify it for his staff.
“Some wholesalers will work with the staff people, because a lot of things get done at the staff level,” he says.
“If they [staff] know your forms, if they know your processes and procedures, you’re going to get shelf space with that producer just because of the staff relationship,” he says.
Goff also notes that technology has helped in this area, with recent developments in electronic applications, forms and commission tracking.
“Electronic applications can facilitate a broker’s life immensely, and his staff’s as well,” he says.
Reproduced from National Underwriter Life & Health/Financial Services Edition, May 6, 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.