It has been interesting, and also a bit sad, to watch the changing scene in what we have called the Agency System. In comparing todays roster of the National Association of Insurance and Financial Advisors membership with that of prior years, 2 things stand out. First, the number of agents (or advisors) listing themselves as independent or affiliated with independent organizations is, in every local association, equal to or greater than the number claiming affiliation with a life insurance company. The second shocker is the number of once large, even dominant, agencies that either no longer exist or continue as a shell of their former selves.

Such a profound change certainly raises the questionwhat happened? No doubt there are many answers to the question. In some cases, companies made deliberate decisions to change distribution systems or their mission. In other cases, just plain neglect of their agency people lowered their profile. Additionally, foreign acquisition of U.S. companies has in some cases caused abandonment of traditional U.S values that pervaded our distribution philosophy.

But there is one reason that I believe is readily identifiable as a major cause of this transition. I refer to life insurance companies practice of trying to “work both sides of the street” in their marketing efforts. Perhaps 3 examples will illustrate my point.

Company “A” once had 2 excellent agencies in our community–one, home service; the other, ordinary. They also had a dynamic group department insuring some of our largest employers. Their field management was respected locally and nationally (one was a past president of the National Association of Life Underwriters). Their agents were prominent in both NALU and CLU activities.

But along the way, the company began to show more interest in brokerage firms and increasingly focused its attention in that direction and neglected to nourish a well-established field force. First, recruiting slowed, then stopped and then came the decline in the number of people who identified with the company.

I remember well the CEO of that company approaching me at an American Council of Life Insurers board meeting and telling me that he was sorry that his company was going to abandon the agency system. It was hard not to laughwho was he kidding? He didnt have any agents to abandon; they had all left in disgust. Subsequently, the company was parceled out and sold piece by piece.

Company “B” was similarly situatedstrong agency, respected locally and nationally, provided great local leadership (also had a recent NALU past president in its ranks) and a number of top producers. Again, the other side of the street became too seductive to resist. Alliances with banks, brokerage houses and direct response people soon had a higher priority and profile than the companys very valuable agency system. In turn, the inevitable erosion set in and today the once dynamic agency is still here but bears no resemblance to its former self.

Company “C” is a different story, but it could also have gone the way of A and B. While CEO of NALU, I was invited to participate in a number of company meetings and conventions. One in particular stands out in my memory. For 3 days various company officers, in their presentation to the assembled agents, preached the virtues of company loyalty. They produced statistics lifting up their estimate of the amount of business their agents were doing with other companies and how much better off the company would have been had the business been placed “at home.” Incredibly, on the last day of the meeting, the company revealed internal and external research indicating that it was important for the welfare of the company that it establish a marketing presence in other arenas. Accordingly, they were in negotiations with a major brokerage firm to market their products through their securities salespeople.

Needless to say, the agents, after hearing endless pleas for loyalty, were shocked. In no uncertain terms, the audience let the company people know that this was no way to build loyalty. The CEO, a very wise man, got the message quickly. He rejected the recommendations of the researchers and the project was abandoned. Instead, recruiting picked up and their field force remains one of the best and most productive in the business.

Some companies may be very happy with their new bedfellows on the other side of the streetbut it seems to me that those who stuck with their agents are doing better.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 5, 2004. Copyright 2004 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.