The distribution of life insurance has taken different courses over the years; the direction often dictated by the distribution method employed by the issuing carriers generating most of the industry’s volume. Now that virtually all the major name brand companies have embraced variable cost distribution, they’ve discovered the efficiency of having their products more widely distributed and by a broader range of insurance producers.
As a result, an issue arises for insurance producers seeking to access one of these carriers and their products. While the logical reaction for producers would be to contact the carrier whose portfolio or product they are looking to sell, most often they are directed to a wholesaler who has a general agency contract. The dilemma the producer faces is: Which one to use?
Issuing insurance companies will often have a hybrid distribution scheme, wherein the contract is held by both traditional brokerage agencies and single-carrier agencies specializing in one’s company’s products. The client for whom the producer is seeking a solution is best served by a multiple company solution search. So, from the standpoint of timeliness and efficiency, as well as customary current practice, the agent is often best served by using one of the country’s hundreds of multiple company brokerage general agencies. But, again, the question is, which to use.
It is important to use the correct criteria in choosing where and how to access carriers and products, some apparent and some not so apparent.
Breadth of offerings
The producer obviously needs to be sure the agency being considered has access to a broad list of carriers. In today’s information-rich marketplace the producer is faced with competitive landscape that demands he or she thoroughly research alternatives for the client. Doing so in one location makes for a significantly more efficient process. However, there are three caveats to address:
? Volume–Does the agency generate enough business through its carriers for both to be important to each other as business partners?
? Knowledge–Do both the marketing and the case management staffs in the agency have a thorough understanding of the products and processes?
? Direct/Indirect–Is the insurance company’s inclusion on the agency’s carrier menu the result of a direct contract or as the result of a third-party agreement? An indirect connection often negatively affects both the volume and knowledge question.
Background and expertise
There are hundreds of wholesale brokerage general agencies across the country and many have all the “right” carriers on their menu. The majority of them are not large publicly held corporations, but instead closely held corporations with fewer than 15 employees. Their principals are usually experienced insurance professionals, many of whom are second generation agency owners.
Unfortunately, the average producer does not often have the opportunity to work directly with the principal but with the staff. The experience and capabilities of this front line staff is critical to any sale process. The producer needs to know the agency principal has surrounded himself with experienced people who have an affinity for the agent’s priorities and conduct their business with professionalism and, as importantly, a sense of urgency.
Pre- and post-sale issues