Knowledge is power. There is no question about that. But for an industry that has faced scrutiny in recent years, the power to change a negative perception regarding fixed insurance products has been limited at best. How did this happen? Why have perceptions of products and the agents who sell these products suddenly become tarnished?
The fixed insurance industry has seen changes in recent decades. The introduction of fixed indexed annuities was only 13 years ago, and at that time, with a new product concept came significant agent training. Licensed agents were equipped with the information they needed to adequately understand the product and properly explain it to their clients.
Since then, the industry has evolved. More products by more carriers have come to market. In order for carriers to stand out, they invented creative ways to promote their products: higher commissions, bonuses, etc. The emphasis on agent education lessened and product pushing began.
Back to the future
Fast-forward to 2008, and we now have thousands of agents in the field representing fixed insurance products, but who don’t fully understand what they’re selling, who they’re selling it to, and even why they’re recommending it to their clients. But don’t blame the agent; it’s not just the agents’ fault that they are not properly trained by the IMOs they contract with and/or the carriers they are selling. It’s the IMOs and carriers who need to re-emphasize product training. This will give their affiliated agents the knowledge and power to better serve their aging clients.
So why the negative perception of the fixed insurance industry? If agents in the field do not fully understand what they’re selling, then they misrepresent a product, not out of immorality, but due to a lack of industry education, making the client unhappy. Clients may then report their experience to local authorities; the media becomes privy to the situation and reports it with a slanted angle, placing the carrier and product in a negative light.
Where did this begin? With a hard-to-please client? With a biased media representative? No. It began within the industry itself and has been brought to light by the unequipped insurance agent.
The insurance industry offers agents amazing opportunities, yet many young recruits who join the field exit just as fast. That can’t be because they don’t believe in what the industry has to offer, or they wouldn’t have entered in the first place.
It’s because they are not properly educated in industry fundamentals, products and moving parts, clients, suitability issues, client profiling and basic business management skills. We are setting new agents up for failure because we are not properly educating them on what they need to know to be effective and successful.
And for agents that have been in the business for the long haul, it’s our responsibility to provide them with continuous education–especially in an industry that encompasses constant change. Our target market for fixed annuity products has changed.
We are now dealing with the lively boomer generation. Their needs are different, their goals are different, and their level of involvement and desire to understand the products where they place their money is greater than the generation before them. If knowledge is power, the lack thereof can be detrimental, both to an agent and to our industry.
How do we turn around an unwarranted reputation and increase the acceptability and even the demand of the products and services we offer? We begin again. The responsibility starts with the carriers and IMOs and their commitment to go back to the basics and educate their affiliated agents. Workshops, conference calls, webinars–whatever it takes.
It’s a sad reality, but many agents in the field today do not fully understand the fundamentals of the insurance products they represent, their market, the trade-offs or how to explain these products to a client. The industry needs to focus on education and help agents to understand the following points:
o The Fundamentals. Insurance products, most specifically fixed and indexed annuities, can be complicated. Details such as participation rate, caps, surrender charges, contract length, and more need to be explained and re-explained to our agent force until they can fully understand and explain the products to their prospects and clients.
o Suitability. Agents need to better understand the appropriateness of an annuity to a client and how it fulfills a client’s needs, also known as suitability. What need to be taught are proper client profiling techniques, and how to ask probing questions regarding risk tolerance, long-term goals, specific needs and wants from an insurance product. These fact-finding questions can help agents properly place their clients in a product that works for their specific needs.
o Trade-offs. Agents need to understand the various annuity products and the options. Clients who have specific goals may want to forgo short-term contracts, a bonus or a carrier rating in exchange for a product with a long-term care rider or more liquidity. An agent needs to be able to grasp the mechanics and workings of the products, then be able to appropriately apply them to a client’s situation.
Era of opportunity
This industry is entering an era of great opportunity. With more than 78 million baby boomers approaching retirement in the next 20 years, our services as insurance agents have never been in a higher demand. But with this opportunity comes a huge responsibility for agents, IMOs and carriers alike.
Agents should be demanding fundamental training from the industry-whether it’s their up-line, an IMO, a carrier or other resource. If we’re willing to take on the opportunity, we must be willing to accept the responsibility and commit to the edification of our agent force. It starts with us. This industry will remain a great industry if we all commit to the education.
Steve Phillips is director of agent education at Creative Marketing, Overland Park, Kansas. You may e-mail him at .