Middle Way Might Be Route
To Higher-Quality Disability Sales
How can carriers pump energy back into disability insurance sales?
Brokerage general agents say one answer might be for carriers to do more to support the middlemen.
In the last few years, disability insurers have started to realize that having good intermediaries might make the difference between profiting by protecting more American workers against financial catastrophe and fighting tooth and nail to take money-losing clients from other carriers.
Too many disability insurers fell into the trap of thinking that looking at premium volume was the best way to assess distribution channels, says Brian Lauber, a vice president for independent distribution at Principal Life Insurance Company, a unit of Principal Financial Group Inc., Des Moines, Iowa.
“It?s not all about premium,” Lauber says. “That’s just one component.”
Lauber, who appeared last month at a disability insurance conference in Bonita Springs, Fla., organized by John Hewitt & Associates Inc., Portland, Maine, spoke at a session on independent disability distribution.
Lauber emphasized that insurers have to get back to basics and perform detailed reviews of how brokerage general agents, career agency systems, direct marketing operations and other channels stack up when it comes to factors such as loss ratios and costs per unit of coverage sold.
“You should be able to look at your persistency by channel,” Lauber said.
The unit cost of selling through brokerage general agencies tends to be low, but insurers have to be sure they are rewarding the brokerage general agencies that bring in high-quality, loyal customers, he said.
Lauber and another speaker at the independent distribution session, George Davidson, president of SecuraDI Consultants L.L.C., Minneapolis, emphasized that good brokerage general agents face fierce competition for the attention of the producers who bring in great clients.
Back in the 1980s, insurers tried to keep manufacturing and distribution in-house. The best disability insurers gave disability agents and disability sales managers the equivalent of a master’s degree in disability insurance.
“Brokerage was basically taboo,” Lauber recalled.
Today, every major carrier allows brokerage, and the typical independent agent sells 7 products, Lauber said.
“We have to get shelf space from those individuals,” Davidson said.
When Davidson tries to recruit new producers to sell disability insurance, “most producers say, ?I don’t want to do it because it?s too hard,?” Davidson reported.
Few independent producers think of disability insurance as something as mainstream as a “niche product,” Davidson added.
In many cases, Davidson said, “I’m a niche within a niche. Producers look at us as a crevice.”
Meanwhile, disability insurers have responded to the claims crisis of the 1990s by rewriting contracts in ways that increase the complexity of the product.
Davidson asked for a show of hands at the John Hewitt conference distribution session and demonstrated that only one of the carriers represented had a formal disability insurance education program for brokerage general agents and other middlemen.
Insurers should be able to improve their own performance if they do a better job of educating and supporting the brokerage general agents, Davidson argued.
Insurers could help by bringing back BGA education programs and working with local industry groups to organize “disability insurance awareness” days to educate both producers and middlemen, Davidson said.
He also recommended that insurers strengthen the BGA channel by introducing products designed for older workers, workers with existing disabilities and other consumers outside the disability insurance industry’s traditional target market of young, healthy, high-income workers with steady jobs.
“As an industry,” Davidson said, “we’re pretty poor innovators.”
Improving underwriting support, streamlining forms and business processes, and adopting consistent compensation strategies could help, too, Davidson said.
He complained about one insurer that sent his firm 3 notices about compensation system changes in less than a year.
But Davidson praised another insurer for using a 1-page agent appointment form.
When other insurers force brokerage general agents to use 40-page agent appointment forms, “that’s nothing but expense,” Davidson said.
Reproduced from National Underwriter Edition, April 2, 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.