Consumer Demands Will Dictate Distribution Strategies
The evolution of the life insurance industry has been going on for well over 20 years, and will continue into the foreseeable future. As many companies have converted from a mutual to a stock business structure, the balance of power has shifted away from the mutual companies.
The old mutual company theory–that consumers are better served when a company does not have to divide allegiance between customers and shareholders–has been disproved. Now to survive, well-run mutual companies have dumped the old "fat and happy" business model, replacing it with rigorous management, comparable to that in a public company.
One area where companies of both types will continue to look for more efficiency is in the area of distribution. While I believe some companies will continue to distribute through a career channel, the trend toward separating distribution from manufacturing will continue, making even proprietary career distribution appear independent.
True independent distribution–direct brokerage, brokerage General Agents, Personal Producing General Agents and producer groups–will continue to grow, reducing a companys need for brick-and-mortar fixed costs. As companies slug it out for market share, they must operate more efficiently to compete and still be profitable. One critical way to do that will be to treat the field as their customers and partners.
What will this mean to the consumer? Todays consumers will decide how and from whom they will buy insurance. Companies will need to identify their markets clearly and design products and select distribution strategies relevant to the selected market.
Producers, as the link between the manufacturer and consumer, will align themselves with carriers and agencies that offer products and services consistent with their clients needs. In todays world, we in the field must accept the reality that consumers will want differing levels of professional advice when they buy financial products. As we build our practices, our value propositions must be consistent with what our clients want from us.
In this article, I will discuss my views on the future of distribution–how it will be consumer-driven and the insurance companys role in serving its customer, the field.
What Consumers Demand
The Internet provides todays consumer more access to information than ever before. This is a mixed blessing, because the information available is not necessarily quality information. But for a product where the consumer perceives that personal interaction adds no value to the buying experience, that product can be bought online.
This may work well with commodity-type financial products where price is the only consideration. A whole generation of insurance agents has taught the consumer to buy cheap term presented on a spreadsheet. These agents and the "paper-mill" agencies that service them are likely to become extinct in a short time because consumers will figure out that the intermediary adds little or no value to the transaction.
The consumer who makes the decision to engage the services of a financial professional will require the buying experience to be enlightening and interactive. There will be core elements that this upscale consumer will demand.
A Client-Focused, Solutions-Driven Process
Many times a casual acquaintance has asked me about my preferences–term or whole life, universal or variable–but the simple fact is what I prefer doesnt matter.
Consumers who choose to work with a financial professional expect us to be their advocate. We must focus on them, their concerns and their goals. We must learn their likes and dislikes and their experiences–both good and bad–with life insurance and investments. We understand that if a persons death will cause financial impact on a family or a business, then life insurance is a tool that needs to be considered.
But the client must understand and accept that concept and examine life insurance as an option compared to other financial alternatives. Until the client reaches this point, product type and specific carrier are totally irrelevant.
In order to help clients achieve their goals, a producer will need to be conversant in a broad range of planning areas, but willing to team up with specialists in other disciplines.
