“There is no question, branding is an increasingly important driver for sales and distribution in the life, annuity and long term care insurance business,” says Michael Hughes.
A senior actuarial advisor with Ernst & Young, in the Chicago office, Hughes says branding is particularly important in the boomer market, where obtaining trust is all important.
Boomers are facing a complex set of issues, Hughes explains. These surround boomer mortality and morbidity, the loss of income from disability, meeting the education needs of their children, and their own retirement and care needs, among others. Many advisors and retail insurers do offer planning and advice in these areas, he continues, but to be effective, they need to have the clients trust.
“Boomers are putting their financial future in the hands of someone else, and they need to know their choices will serve them well for 20 or 30 more years,” he says, and branding helps build trust.
How to work with branded products when advising boomers is the focus here.
This is not a small matter. Robert Walker, a financial planner in Florence, Ky., went from selling a relatively unknown product line to selling a branded product line and says his sales cycle has been cut by 10 to 15 minutes per case as a result.
A vice president with Millison-Walker Financial, whose broker-dealer is Questar Capital Corp., Walker had sold insurance under the Manufacturers Life USA (Manulife USA) name for several years. But all that changed in April 2004. Thats when the parent company, Manulife of Canada, purchased John Hancock. This brought the Hancock name into the selling picture. Then, in January 2005, Manulife rebranded its U.S. variable life and annuity products and its Signator Financial Network career agency system with the Hancock name. It also renamed the U.S. company John Hancock Life Insurance Company (USA).
Those changes made a big difference for Walker. Most U.S. customers did not recognize the Manufacturers name, he explains, “so I had to spend time explaining who Manulife is and what they do” before moving on to making more detailed recommendations.
But virtually all customers recognize the John Hancock name, so now he no longer needs to “explain the company,” he says. Thats how he has saved 10-15 minutes in sales time.
Branding simplifies things for the client, he says, explaining that many boomers do not want to be “bombarded” with detailed information. Boomers want to bring their financial problems to the advisor and have the advisor make recommendations, he says, adding this discussion is about financial strength, disclosure and how the plan meets goals and objectives, not company particulars. He focuses on company strength, a point he says is “of paramount importance when offering products with guarantees.”
Walker believes brand recognition gives people a sense of relief. “It makes it possible for us to move on to the next part of the discussion.”
What does the term “branded products” mean? In the insurance sector, it refers to insurance policies issued by carriers widely perceived as offering financial strength, long-term stability and integrity in service, says E&Ys Hughes.
Many insurers brand both themselves and their products/services, building a “name” that becomes associated in public perception with expectations of top quality, service and strength. Financial advisors can brand themselves, too, says Hughesfor instance, as trusted advisors whose advice, recommendations and other services have earned them the confidence of their clients.
Insurance company branding especially emphasizes the insurer will “be there” for the long term, he adds. “And advisors and providers both position their brands to reinforce the message that they have the customers best interests at heart.”
James M. Benson, president and CEO of John Hancock Life Insurance Company (USA), predicts that using branded products and services with baby boomers will be “essential” in the years to come.
“Top ratings, scale and product innovationsthose are the things that count” to be a major industry player, to be among the top 5 or 10 companies. But if a top-10 company wants to grow its market share, he says, there will be more consolidationsand “the branded companies will do best.”
Benson admits to having a bias, because Hancock and its products have widespread brand recognition. (In September 2001, a Roper Starch Worldwide and Plan-it Marketing survey found the company had 95% awareness among consumers.) Still, he maintains that in most sales situations, all things being equal, the market perception and acceptance will go with the branded product.
In particular, boomers will select the branded products, he predicts.
Boomers generally have led sheltered lives, Benson points out, noting he is a boomer himself. They were born after World War II, did not have big worries about going to college and generally have led “charmed lives.” But in recent years, theyve had a wake-up call, he says. For instance, they now have cash balance plans or 401(k)s instead of pensions, and they dont know how to manage the money on their own.
In retirement, they are facing mortality risk, longevity risk and morbidity risk. “Theyre saying, holy smoke, what am I going to do?”
That question, and their approaching retirement, is spurring boomers to buy things with which they have familiarity and perceive as credible, he says. For instance, when they go shopping for, say, term insurance, they may see a “sea of stuff.” Perhaps theyll see 100 term policies, with premiums varying by a couple of cents per $1,000 (face amount). If 19 of the top 20 products are from companies they never heard of, but one is from a branded carrier, Benson predicts the boomers will go with the branded company.
Why? “Like everyone else, boomers are susceptible to brand pressure. We buy what is familiarif the company does not put branding ahead of substance [product, service and benefits].” The branding becomes the differentiator, he says. In the sales situation, “the ties and close calls will go to the well-branded companies.”
Thats true for distributors who work with boomers, he adds. “Distributors will flock to these companies, because theyll make it easy [to do business] and offer decent interest rates, product features and ratings.”
This is not to say that advisors are totally ignoring non-branded (or lesser-known) carriers. Jack Desemar, president of Future Systems Advisors, LLC, a Baton Rouge, La., financial planning and product development firm, says planners are aware that branded companies can put out inferioras well as qualityproducts and services. That shouldnt happen, but sometimes it does, he says.
For instance, some branded companies Desemar has followed include “gotcha clauses” in the fine print that he says work against the customers best interests. Also, he says he has found some branded variable products do not price or perform well, and some branded fixed products are issued by companies with poor histories on crediting rates and dividend scales on older policies.
The point, Desemar says, is for the advisor to check out the branded carriers and products, as well as other carriers and products. Ask questions about the pricing, history, performance, etc., within the context of what the customer needs.
What if there is a close-call situation, where a branded and a non-branded product have many similarities but the branded costs slightly more?
“After I go through all the steps and then look at the financial strength and ratings, if the premium of the branded product is higher by only a hair, then Id probably go with the branded product,” he answers. But he says clients are better served by not letting the branding be the first consideration.
Hughes, of E&Y, agrees. The advisor should help the customer weigh the options, he says. “There may be situations where a company does not have the track record, but the product may be more competitive and offer a near-term advantage that the customer needs. If the benefits are guaranteed and if the carrier has financial strength to be there, then it will be a little easier for the advisor to recommend the less well-known carrier and product.”
But “if the product is not guaranteed and if the company does not have financial strength, this would be a less viable option,” he cautions.
In selecting branded vs. non-branded products, “there is no black and white answer,” he contends. “The reality is, value comes in many forms, be it strength, service or other factors.”
So, is that when the art of financial advice kicks in? “Right,” says Hughes.
Reproduced from National Underwriter Edition, January 27, 2005. Copyright 2005 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.