Producers will be the dominating force in distribution of life insurance products in the future, said Timothy Tongson, consulting actuary, Milliman USA, Minneapolis.
Of all the sources of profit in life insurance, “distribution is probably the most important,” Tongson said. “It drives what happens throughout the entire process. Nothing happens unless a sale is made.”
He spoke here recently at the Life Insurance Conference sponsored by LIMRA International, Windsor, Conn.; LOMA, Atlanta; the Society of Actuaries, Schaumburg, Ill.; and American Council of Life Insurers, Washington.
Tongson said factors affecting distribution include consumer needs and preferences, demographic/societal changes, consolidation and convergence, product “performance,” legal/regulatory developments, and technology.
“The 24/7, more, better, faster–thats not just some group out there were not aware of, thats us,” Tongson said. “Were that group, and technology is driving that.
“Wireless technology is booming, and the Internet is making it easier to distribute the product.”
Consolidation and convergence have resulted largely in agents feeling disempowered, he said.
“People in companies who once felt they had a voice and leverage now dont because of consolidation,” Tongson said. “Its changing the distribution.”
Regarding demographic and societal changes, he said the 45-64 age group is growing in both number and disposable income.
“If you dont have a strategy to sell to this group, youre missing a big opportunity,” Tongson said. “It should be, what does the customer need, rather than, heres the product, lets push this. “
Another trend will be greater distributor independence. More companies are already letting their captive agents sell other companies products, Tongson said.
The whole process of selling life insurance will likely move to a partnership between insurers and distributors, he said, adding that it is in insurers best interests to be less insistent on agents selling solely their products.
Agent-based distribution models will likely move toward the affluent market, particularly for the best producers, he said, because the affluent are a good risk profile due to their access to health care.
“Good agents will migrate this way because this is where the money can be made,” Tongson said.
The more successful producers will likely be able to contribute in areas other than product sales. They will likely have input in product design to accommodate the demographics they sell to and will also likely have more freedom to sell other companies products, he said.
Banks will also take a larger role in life sales, Tongson said.
“Most people in the middle market have their money in banks, so banks have access to this market, but life sales havent been great,” he said.
Only 25% of banks surveyed in a 2001 American Bankers Insurance Association study targeted the middle market. More targeted the affluent market, according to the Washington-based organization.
“Then, few people knew you could buy life insurance from a bank and fewer did,” Tongson said. But, he predicted this will likely change in the future as consumer awareness grows.
Tongson said what banks need to do to be successful selling insurance to the middle market is to make it convenient by giving coverage immediately with no medical exam, keeping the policies simple for bankers to sell and customers to understand, and making it valuable with competitive pricing.
Some attending the session suggested selling out of banks wouldnt work because banks for years have been pushing people out of the building toward automated teller machines.
They suggested it would be difficult to draw customers back in to buy a life insurance policy from a teller. And, the tellers present a problem as well, session-goers said. Banks will not likely be interested in paying higher salaries for tellers licensed to sell life insurance, as opposed to the nonlicensed employees that currently make up the majority of the bank workforce.
Tongson did not argue these points; neither did he concede that banks couldnt make a go of selling life insurance to the middle market. Innovative options to serve the mass market will continue to develop and evolve, Tongson insisted.
His advice for developing a successful distribution strategy is to look at what ones organization does well, set up goals and create a strategy to get there.
Reproduced from National Underwriter Edition, April 7, 2003. Copyright 2003 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.