Bob Kerzner is a passionate advocate for the life insurance industry. Since 2004 he has been the President & CEO of LIMRA International, a world-wide organization dedicated to providing its nine-hundred member companies research, value-added marketing and distribution expertise. As Kerzner describes it, over its ninety-year heritage LIMRA has become the repository for all of the life insurance industry’s knowledge and research. Not Long ago LIMRA merged with LOMA, a worldwide organization of more than 1200 member companies that is engaged in research and education designed to improve company operations. Kerzner now leads both organizations.
Kerzner offers us some valuable insights in this wide-ranging interview including comments on the insurance industry’s future role in Boomer retirement.
Macchia: To begin, Bob, and before we jump into the LIMRA discussion, I think people would be interested in knowing about Bob Kerzner, the executive. Would you be kind enough to talk about how you came into the financial services industry, how that began, and the steps that led you to your current position as President and CEO of LIMRA?Kerzner: Sure. Actually when I graduated from college, David, I said that I would do anything except sell life insurance. It was the only thing that I had absolutely indicated I wouldn’t do.
And yet an opportunity came my way that I absolutely found fascinating. It was, in fact, an opportunity to sell life insurance in a different way, working through independent agents and working with their best, wealthy clients. Once I got into it, I found out that I loved it — that it was an intense business and one that would allow me to be creative in helping people find solutions to complex problems using a unique financial tool. I worked for one company for 30 years — working my way up from the lowest field sales position to field management and ultimately running the entire life insurance division with both top-line and bottom-line responsibility. I really had a wonderful career.
After I retired, I decided that it was time for a change, to do something different. Being CEO of LIMRA allowed me to use my 30 years worth of knowledge in a very different way and allowed me to do something bigger for an industry that I’ve grown attached to.
Your answer reminds me of something, perhaps because it’s reflective of my own background. But I’ve always believed that people who entered the business through the door of sales, people who have had real experience at the retail level, who understood the dynamics of prospecting and presenting to retail clients and all that that implies, that such people obtain what amounts to a life-long advantage in terms of how they are able to apply their knowledge and skills of the business no matter where their careers may take them. I wonder if you buy into that?Unequivocally. My experience in the field-having the experience of actually sitting across a table from a potential customer and trying to convince them that our product could solve a problem -gave me a unique perspective when I was running the division many years later. I don’t think that there’s any other way that you get that kind of perspective.
And frankly, one of the saddest things today is that very, very few of the most senior people – the CEO roles in our industry – are coming from the field. We’re certainly seeing less and less. And I do think that you get a very different point of view, as you say, that stays with you forever.
A relevant analogy can be found, again, in terms of my own experience in which I describe my having had a leg in each of two separate and distinct ponds. Meaning, the different experiences of the world of agents and distribution, the salt water pond, and another set of experiences having to do with the business challenges of product manufacturers- the fresh water pond. I observe that it’s rare that these two ponds meet and the water becomes brackish. And because they do not meet well, it’s seldom that there is genuine understanding of each other’s challenges and frustrations and it’s rare that meaningful communication exists between the two populations. Do you agree with how I see it?Well, from my viewpoint I see it slightly different. We’re creating a product in our business that’s very technical. It must be passed through 50 different states, often the SEC, and the NASD, which will care about how you sell it. During the development process, it’s easy to get wrapped up in the complexities and lose sight of the consumer’s needs.
I think that having the experience of facing customers eyeball-to-eyeball, face-to-face gives you a perspective to step away for a moment from all of the technical parts and say, “OK, how is this going to play out at the kitchen table.”
Let me ask you about LIMRA. LIMRA is an organization with a long history. It has a high profile, and it’s well thought of. For readers who may not be familiar with the organization’s mission and activities, would you describe them?The first thing, to your point, is to explain that LIMRA is ninety years old. If you think about how few companies make it ninety years, I think that will tell you that there’s something about what we’ve done that is significant.
First and foremost, LIMRA is about research. For ninety years we’ve been the repository for of all the industry’s knowledge and research. Generally speaking, when somebody reads a report about insurance or suggests that somebody’s number one in the industry, they’re usually referring to LIMRA’s benchmarking of the industry.
We also do a lot of the forward-thinking research about where the business is going. We’ve certainly been conducting more consumer research to try to understand how people see our industry, and think about our products; and what motivates people to buy or not to buy our products.
A leading strength has also been in the distribution area. We’ve trained many managers throughout the industry. Most of the industry’s senior people were products years ago of LIMRA training.
We’ve expanded abroad. We’re now in 64 countries worldwide with more than 800 member companies. We’re now training in emerging markets in Eastern Europe, as well as throughout Asia, on ways to modernize distribution and increase productivity to help companies be more successful.
That’s certainly a broad array of activities LIMRA is involved in. But I want to ask about the organizational structure. LIMA is chartered as a non-profit organization, I believe?Yes. We are owned by our members. They fund all of the research, but I should mention that we also have businesses that are not part of our 501 C(6). We have a wholly-owned subsidiary that provides an array of services to the industry. For example, for 65 years we have done the testing for companies to determine who is most likely to become successful as a producer. Today, we do similar testing for a number of fortune 100 companies, including leading stock brokerage firms. We’ve become significant in the compliance business. We help provide shared solutions to the industry designed to address real problems companies are facing.
Beyond the research, we conduct an array of other activities, such as consulting, with a strong practice in compensation planning. And, David, I think I’d be remiss if I didn’t mention one more thing that is really at the core of LIMRA, and that is networking. We run a broad spectrum of conferences and committee meetings throughout the year where people who share the same roles and responsibilities can talk about and share best practices, share ideas and really get to know one another. That’s a really important aspect of LIMRA. It’s where the industry meets.
Sort of a vortex for the insurance industry. I like your word better than mine.
Let me ask you about another issue which may become very important in LIMRA’s future, and that is the idea of a merger between LIMRA and LOMA. I presume that the decision to combine LIMRA and LOMA comes out of an analysis that defines synergies and benefits arising out of such a combination. Will you talk a bit about LOMA’s work and then describe the benefits you see resulting from such a merger?This is really an idea whose time has come. It’s been looked at in the past and for a variety of reasons, the timing was not right. LOMA is clearly in the education business. While we have educated the field, LOMA has been the major educator of the Home Office staff. Their FLMI designation within the back offices of companies is really the designation, the gold standard. It is the training, the broad knowledge that industry professionals want. Both, because of the depth and breadth of that training and because it actually helps them do what they do better.
LOMA runs conferences just as we do, but often there’s more of a technology or efficiency focus. So while we do many of the same things, we do them in different parts of the organization. Coming together helps us take care of the totality of these education needs.
A combination is also greatly complementary. They have built a great e-learning platform. We have not done that. Why should the industry pay for two e-learning systems? The benefits of merger are that the industry could have, for the same capital outlay, a much broader capability to serve the entire life insurance company. So, those are just a few of the highlights.
Bob, I’d like to shift to some challenges and opportunities facing life insurers. As you know I am a creature of the insurance business having begun in 1977 as an agent at the lowest rung. I very much value the 30 years I’ve been associated with this industry. I’ve had opportunities and financial rewards beyond anything I could have hoped for including an excellent education. So as someone who has gained a lot from the industry I’m an advocate for its best interests in the future, especially in terms of the Boomer retirement opportunity.
I often times think, however, that life insurers are not likely to reach their fullest business potential unless and until some of the most intractable challenges and problems that hold back its growth are first identified, and then dealt with and eliminated so that the industry can set itself up for robust growth. I wonder if, at a high level, this is something that you think about? And if it is, perhaps we can explore some subsets of this?It’s something that we think about a lot. In fact, what I can tell you is that in large measure our annual meeting, which is our most senior and largest conference of the year, is really aimed at these very topics. This year’s theme is about execution.
In my opening remarks, I will take a clip of a comment made last year by the president of a major mutual fund company who charged that the life insurance industry is going to blow the opportunity because they have not been very good at execution. Ironically, that mutual fund company is owned by a life insurance company. So, I thought it was a particularly interesting statement. We took it seriously enough that we built this year’s program around the concept of execution. What does our industry have to do to capture their fair share of that opportunity that everybody knows is the biggest in history?
A couple of the things that are important to look at: First, many companies are too siloed to look at the total needs of the customer-we don’t spend enough time as some other parts of the financial services industry to really understand what the customer wants, how they think. Although, we certainly think that LIMRA can play a role in that piece.
Second, there’s a lot of discussion about whether we take too much of a product focus. The industry often takes a manufacturing view. Is that the best approach? Third is an issue that LIMRA talks about–it’s part of who we are, our fabric– and that’s distribution. The number of producers continues to decline in terms of career agents. The number of new agents continues to decline. So, will there be enough distribution to meet these needs? And, if not, which we believe is a certainty, what will the new avenues be to get our products in front of people more often?
So, these are some of the key issues that will be focused on at our annual meeting. I might mention that our special guest will be Alan Greenspan, who will certainly tell us about some of the macro-financial issues that we need to be thinking about.
What’s you’ve articulated here is in my day-to-day wheelhouse. Let me begin this by telling you that one of the reasons that this blog was started was to try to galvanize the attention of industry leaders to some of the very challenges you’ve just mentioned. One of the issues that I’ve written about extensively is reflected in my own experience where 30 years ago I entered the business at the end of the rate book era and then saw that the introduction of the PC began to change things rather dramatically. It became easier for agents to assess the relative benefits of different companies’ products, whereas previously they may have been focused exclusively on a single company’s products. And this led to a major shift in the way producers work which has led to today’s reality that most agents are independent agents.
As this change took root the insurance companies tended to revert to a stance where the concentration was increasingly on manufacturing products rather than developing producers. The intensive training and education that was once routinely provided was in many cases eliminated, and agents transitioned from career agents to what might be termed “free agents.” And I would argue that this is one of the most significant reasons that the industry is plagued by a poor public image and poor sales practices. I wonder if you buy into that historical chain of events and its leading to some of today’s problems?Yeah…. ah… unfortunately, I think that there’s a missing piece in what you’ve suggested. We have created a model that actually talks about the natural events that occur as a market emerges. What I can tell you, David, is that virtually all countries begin with a very strong career agent system and over time, alternate distribution begins to enter. Part of the issue is that somewhere along the line, products begin to become much more sophisticated, producers may well not be trained adequately, sales practices become aggressive and issues emerge around mis-selling. Now I should be clear that this even occurs in alternate distribution.
So, it’s not just agents. Those practices tend to invite tighter and tighter regulation. There tends to be a scandal resulting in poor public image and then, ironically, it tends to become more difficult to recruit more people because now the job is harder. Anyone today, who has to go through the myriad of 30-page proposals, 200-page prospectuses and all of the rest, can certainly see what happens as products become more complex like they do in a mature market. But you can’t just lay that at the company doorstep. In fact, unfortunately, the actions of producers, whether they are career agents or people working for financial institutions, help to create this problem.
You know, I think that’s fair. But don’t you also think there’s something more? As career agents have increasingly become independent, they have also become more increasingly underproductive than they were in the past. For instance, when I was a young agent I was expected to achieve at least one sale of life insurance per week. And some of the veteran agents completed two or even three sales each week. This is phenomenally more productive than today’s agents achieve.