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Why Some Insurers Are Focusing On Brokerage Distribution

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Boca Raton, Fla.

To be successful distributing products through the insurance brokerage system, some companies are making brokerage distribution their main, and often only, focus.

That message emerged several times at “press room” sessions held here during the 21st annual meeting of National Association of Life Brokerage Agencies, Fairfax, Va.

The sessions are a series of chats with the press, conducted in tandem with–but in a separate location from–the NAILBA annual. They are arranged so that top company executives speak at allotted times about their companies, products and strategies. These discussions are free form, so the uniformity in message at the 2002 sessions–about the importance of one-channel distribution–was noteworthy.

“Ours is a unique strategy,” said David S. Lenaburg, president and CEO of the Legal & General America Companies. “We have a narrow focus on mortality risk products,” and “all of our business comes to us through the brokerage general agent market.”

L&G is the British owner of Banner Life, Rockville, Md., and its New York affiliate, William Penn Life.

Banners strategy is to stay competitive in the mortality (term life insurance) market, said Lenaburg. This is a very narrow focus, he allowed, and it requires a great deal of efficiency and a commitment to staying very small, he said.

Therefore, the company makes ample use of document imaging technology, maintains a “very flat” organizational structure and uses the brokerage general agent structure for distribution.

“We have no desire to deal with the direct seller directly,” he said, and to make this selling proposition work “the business has to come from the BGA channel.” This is so whether the seller is an independent agent who works with clients individually or an Internet distributor, he said.

In another session, B. Eugene Wraith, president of Lincoln Benefit Life, Lincoln, Neb., said his company has also endorsed a BGA-only approach to distribution.

Founded in 1938, this company has sold through the brokerage channel since 1984. However, in the last year, it narrowed its focus even further, Wraith said, by deciding to do business only with “NAILBA-type” (high volume and highly skilled) brokerage agencies.

As a result, this Allstate Life Insurance Company subsidiary no longer has an alternate distribution system. All Lincoln Benefit business comes through the 155 NAILBA-type organizations with which it has contracted, Wraith said.

“Weve always been known for our product development, and for release of a lot of competitive products,” he said. But he added that the company is also known for its relationships–for caring about and helping the people with whom it deals.

The decision to work only with NAILBA-type brokerages is helping it emphasize that, he indicated. For instance, the company plans to continue rewarding and offering incentives to its BGA partners, he said.

Lincoln Benefit offers incentive programs “with the intention of rewarding the BGAs for doing business with us,” Wraith stressed, “not with the intention of attracting (new BGAs).”

The strategy is part of the companys goal of being known as the company that helps agents grow their business, he added.

Allianz Life Insurance Company of North America Life, Minneapolis, Minn., has also decided on a single-channel distribution focus and no longer uses multi-distribution channels, said Charles Kavitsky, president.

Today, he said, Allianz only distributes variable products through registered reps, and non-registered products through independent agents in the BGA channel. It does not distribute through the Internet, direct mail or banking channels, he said.

“This structure serves us extremely well,” he said. “We get the bigger producers, who bring in $5 million to $10 million in personal production, and we focus on products they are most interested in, such as equity index annuities and long-term care insurance.”

The structure also enables Allianz to give producers the support they need to run their businesses, Kavitsky said.

In particular, the company is offering these producers help with “practice management,” he said. This can range from education on training staffers to answer the phone properly to how to touch the customer after the sale.

“The practice management seminars and materials add value to the products we offer to agents,” said Patrick Foley, president and CEO of Allianz Individual Insurance Group.

Lenaburg, of Banner Life, terms his companys strategy a “single-minded” approach–one has been profitable and that has also been “a lot of fun” to execute. “This way, we know what we do and (we) can be good at it,” he said.

Banners emphasis on mortality-only products is unusual by todays standards, he allowed. The company does do term conversions (to a permanent product), he added, “but we do it kicking and screaming.”

Many insurers prefer to diversify by offering accumulation products, too, he observed. But he said the asset accumulation business is generally less profitable than the mortality business, and companies in that business “have to be huge to be profitable.” By contrast, his company has only 350 employees.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 2, 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.


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