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.
Traditional uses of life insurance in the business market continue to grow in popularity. Example: funding qualified plans with life insurance, particularly under IRC Section 412(i) Defined Benefit Plans.
Funding executive benefit strategies with life insurance is also of great interest to small business owners. Strategies such as nonqualified deferred compensation, executive bonuses and business continuation planning continue to offer tax-efficient strategies that typically drive large life insurance premiums.
Training, training and more training. Like the successful career agencies of the past, life brokerage agencies must offer services that affiliated producers desire to meet growing needs. Many brokerage principals are concerned about committing enough money and resources for recruiting top producers, paying a support staff and providing incentive payouts for producers to place business with the agency.
Coupled with shrinking allowables and payouts, this situation makes for extremely tight budgets. Consequently, there is little or no money left in the budget to train new and existing producers. To exacerbate the problem, shrinking home office budgets have resulted in many career agents with little or no training in life insurance sales.
As previously mentioned, when these career agents move into personal production, many look to the independent brokerage agency to “take up the training slack” and provide education and support for high-end sales.
To that end, brokerages should form a close partnership with a carrier that is uniquely focused on serving them and affiliated producers through superior products, competitive underwriting and responsive advanced sales support. In addition, carriers who offer turnkey marketing kits that include presentations, prospecting letters and producer guides will help ensure an agencys success.
Know where to find support. Carriers offer brokerage agencies experienced and sophisticated wholesalers, plus a “backroom” of internal wholesalers and an advanced sales department.
Wholesalers can provide “onsite” assistance to an independent brokerage agencys own support staff with illustrations, training and product assistance. Effective wholesalers are trained to give informative seminars on the latest advanced sales ideas. Oftentimes, these seminars include coveted continuing education credits.
Brokerage agencies that seek to expand and improve operations will no doubt improve their own effectiveness, not to mention the bottom line. In short, agencies that strive for growth today will become the successful businesses of tomorrow.
Creating alliances with carriers uniquely positioned to service the brokerage market could yield high dividends. In so doing, brokerage agencies will not only get the message out to independent producers but also enable them to understand, promote and close sales.
Daniel J. Munroe, JD, CLU, is director of advanced sales for AXA Distributors, LLC, New York, N.Y. You may e-mail him at email@example.com.
Reproduced from National Underwriter Edition, April 8, 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.