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March 30, 2005 at 07:00 PM
By Daniel J. Munroe
The life brokerage market has not been immune to the drastic changes taking place within the life insurance industry. The number of life insurance carriers has fallen to 1,123 in 2003 from a high of 2,343 in 1988. The consolidation of life insurance brokerage agencies likewise has followed suit.
Although the consolidations have resulted in tremendous growth among existing carriers, life brokerage agencies continue to desire “small carrier” service, particularly in underwriting, commission payments and sales support.
The most successful brokerage agencies have learned from the accomplishments and mistakes of yesterdays successful career agencies. Life brokerage agencies are in many ways similar to the career agencies of 30 years ago.
In those days, the most successful agents worked for an agency manager who trained and developed the agents, and provided strong administrative support and case management. Managers who offered superior service could hire and retain the industrys most productive agents.
Word soon got around about these valuable “service-oriented” managers who cared about the success of their agents. This resulted in a highly profitable relationship for both parties.
As these agents leave their respective career systems and become independent producers, their desire for training, support and service continues. The challenge for todays brokerage agencies, therefore, is to operate in a manner similar to that of the most successful career agencies in years past.
Agencies must assist producers in sales ideas that transcend basic estate planning. Carriers can provide them with the opportunity to educate their producers on other advanced concepts including business insurance, qualified plans and wealth transfer.
Over the past 20 or so years, selling life insurance to pay for estate taxes was all the rage. With a relatively low unified credit in effect during that period, many households had an “estate tax problem.” Producers, therefore, had to sell only a few large policies to generate handsome premiums.
That changed with the 2001 Tax Act. The applicable exclusion amount continues to increase each year and ultimately sunsets in 2010, albeit for only one year. Consequently, the “selling life insurance solely to pay for estate taxes” market has decreased dramatically.
Successful brokerage agencies must embrace “back to basics” sales strategies. Fundamental planning techniques for estate enhancement, wealth transfer and tax planning remain as critical as ever. Indeed, sales strategies other than using life insurance to pay for estate taxes exist.
Estate planning techniques using GRATs, survivorship access trusts and privately financed life insurance strategies offer solutions to high-net-worth clients. With millions of baby boomers facing retirement soon, the strategy of using life insurance as a cash accumulation vehicle provides a critical planning tool.
