By

San Francisco

The survey that Mathew Greenwald & Associates completed recently of 263 annuity producers from wirehouses, super-regional and regional brokerage firms “is a story of the limitations of the potential of stockbroker sales of variable life insurance.”

Speaking at the variable life conference of the National Association for Variable Annuities earlier this month, Mathew Greenwald, head of the Washington-based research firm, said there were a number of reasons why stockbrokers and financial advisors at these firms should be good targets for VL sales. They have good relationships with affluent clients, he said, and are familiar with equities. Also, he said, stockbrokers “should be responsive to new products.”

Nonetheless, life insurance sales are still far below their potential. Although about a third of the brokers surveyed recommend life insurance for estate planning and death benefit protection, only 9% recommend it for retirement planning and only 8% for tax-favored accumulation.

Among wirehouse brokers, in particular, Greenwald said, about a third of them sell no life policies but still say most of their clients have a death protection need. “This is an opportunity lying fallow.”

Of those brokers who have sold life insurance, the survey showed that about three-quarters sell term insurance and nearly half sell variable life. Universal life and whole life follow far behind.

The percent of time that a broker meets with a client himself when selling life insurance varies according to the type of firm he works for. Wirehouse brokers sell by themselves 63% of the time, the survey shows, while super-regional brokers do so 76% of the time, and regional brokers 85% of the time.

Greenwald said these results show that wirehouse brokers have someone else assisting them 37% of the time. Most often brought into sales presentations are life insurance specialists with the brokers company or broker/dealer. After these, those most often assisting are a life insurance wholesaler or advanced underwriter.

The survey also showed, however, that after a few sales, the brokers feel less of a need to bring in their firms life insurance specialist.

Almost 40% of the brokers strongly agreed with the statement that life insurance is an important part of most clients financial planning. “This shows it is not a product that is rejected,” Greenwald said.

Additionally, one-third of the brokers strongly agreed with the statement that “the complexity of life insurance products makes them difficult to sell.” Here, Greenwald pointed out that two-thirds dont agree strongly with this.

However, the statements that “tax advantages make life insurance a very competitive product” and “life insurance is an important part of most clients investment strategy” drew strong agreement from only 30% of the brokers. “These factors tell a less compelling story,” he said.

Yet, when brokers were asked how useful it might be for their clients to get the possibility of avoiding estate and income tax on large death benefits from VL, 79% said it would be very useful. Lesser percentages saw the usefulness of VL in its ability to achieve tax-advantaged gains on equity investments and the range of options available in its investment account.

Another result the survey showed is that the more involved a broker is in selling variable annuities, the more likely he is to see the benefits of VL in terms of: better meeting client needs, increasing his income through high commission sales and gaining control of a greater proportion of clients assets.

When asked what is the most important thing life insurers could do to encourage VL sales, education and training overwhelmed every other response, including simplifying or streamlining the process.

Simplification in terms of underwriting or products with fewer loads did score highly, however, when brokers were asked how useful these measures would be in making VL sales more appealing.

The survey showed that the average number of life sales is higher for brokers who are new and less experienced (“they are looking for ways to make money”), who have sold more VAs, and who have more clients and younger clients.

Greenwald said there were a number of implications to be drawn from the survey. First, he said, it shows there is an opportunity to distribute more VL through the broker channel. “These are the brokers with clients who have needs, who see increased income from the product and who believe the product can strengthen their relationships with their clients,” he said.

Second, he said, is that effective training and education are imperative. “This is really the impediment,” Greenwald said. “They need to get launched, so that once they start selling it theyll get more comfortable.”

Third, he said, the survey shows that simplifying products for the channel will be useful. “This will increase the comfort level.”

A fourth implication is that targeting approaches by type of firm and type of broker within the firm is important. This means not only targeting the most receptive brokers in the firm, but also differentiating between wirehouse, super-regional and regional brokers.

Fifth, Greenwald said, is that reinforcing how life insurance can help many clients with estate planning and death protection needs would be useful. “They know it and are receptive, but are not doing it,” he said. “They need to be reminded to bring it forward.”

Sixth, helping brokers analyze their client base to identify those with strong life insurance needs will stimulate sales. “Many brokers underestimate their clients need for life insurance protection,” Greenwald said.

And, finally, he said many brokers appear uncomfortable discussing life insurance with clients until they have established a strong relationship with that client. “They dont have enough confidence in the relationship to maximize it,” he said. “So, it would be useful for them to plant seeds to talk about it later.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 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.