While life insurance sales, measured by premium, increased 8% last year over 2006 levels, in the life brokerage segment sales rose over 12%, according to LIMRA International, Windsor, Conn.
So, any company looking for growth should enter and expand into the brokerage marketplace, right? Nothing could be further from the truth. It’s extremely difficult to do this, as companies learn every day.
Case in point: One small company decided a while back that it wanted to go into the brokerage market. “If we build it, they will come,” boasted the leaders. To “wow” producers into selling, or at least looking at, its products, the insurer decided it would focus on unique product features. After all, the insurer had already achieved a number of product firsts in its geographic region–first with a universal life policy with no-lapse guarantee, first with a true no-lapse guarantee on variable life, etc.
“This will be paradise for the brokers, and sales will soar,” enthused the leadership. But it didn’t work out that way. What was the problem? The insurer ignored the 3 keys of insurer success in the brokerage marketplace. Here are those keys:
Company sustainability. Ask, is the company going to be a flash in the pan with its product offering?
A few years back, one insurance company had by far the lowest universal life no-lapse guarantee premium. Producers flocked to the company with business, but a few months later the business wasn’t getting processed and a dramatic repricing occurred. In effect, the company had grabbed market share and then pulled back.
Another company in mid-2006 stopped accepting any new business while it retooled processes and its UL product.
In both examples, the companies experienced dramatic declines in business. To this day, they are still trying to recover from a sustainability issue.
So, then, what to make of news that an insurance company which has been successful in the brokerage arena with one product line (say term) wants to expand into another product line (say, survivorship universal life)? The street-smart observer should first ask the sustainability question: Is the company ready with advanced sales design and support, or will it just offer competitive pricing for a short period?
Distribution integrity. There are really 2 facets to consider regarding distribution. These are internal and external integrity.