The U.S. economy may be heading into a tailspin, but the prospect of a long and painful recession hasn’t stopped life brokerages agencies and independent marketing organizations from building out their businesses in 2008. Whatever the nation’s financial woes, sources tell National Underwriter, substantial investments in people, technology, geographic reach, marketing budgets–and, yes, fattened commission checks for producers–were critical to helping these middlemen keep pace in an increasingly competitive marketplace.

“The critical mass needed just to stay in the game is getting so high,” says S. Reed Ashwill, president of Borden Hamman Agency of Dallas, Tex. “We have to do so much more in production to stay at the same level that we had to change our business model.”

Adds John Bulbrook, CEO of Wellesley, Mass.-based Bulbrook/Drislane Brokerage: “There may be a recession, but we’re choosing not to participate in it. To succeed in this business, we’ve got to meet more people and work smarter. There’s no other way.”

Amid the credit crisis and economic contraction, IMOs and brokerage agencies reported mixed financial results. Jeff Cassat, a chartered financial consultant and vice president of marketing at Capitas Financial LLC, Minneapolis, Minn., notes that sales for the year were flat. Revenues from the firm’s national accounts (wire houses, banks and brokerages) were up, but revenues from the agency’s channel of independent advisors suffered a dip.

Likewise, Gary Baker, president of Baker & Associates Insurance Agency, Scottsdale, Ariz., reports that, following a “fabulous” first quarter, sales steadily declined in the second and third quarters of 2008 owing to the deteriorating economy. But he expects to close out the 4th quarter with a 70% increase (though down 25% for the year in comparison to 2007).

To the extent that IMOs and brokerages enjoyed gains, sources say the souring economy–and clients’ concerns about their own shrinking nest eggs–actually contributed to the positive performance. Among those taking this contrarian view is Bulbrook/Drislane Brokerage, which enjoyed “excellent” sales of fixed annuities.

“Since the onset of the financial crisis, we’re seeing more new policy applications than ever before,” says Bulbrook. “Because of declining stock portfolios people are worried and they want something safe. Also, the rates on fixed annuities are now superior to those offered on CDs.”

The attraction of “safe” insurance products in tough times is not confined to clients. Cassat says many affiliated investment professionals have expanded their portfolios and expertise to encompass life insurance-funded estate planning and executive benefit solutions because of the revenue potential. Among his best national accounts, Cassat counts registered reps employed at UBS, Morgan Stanley and Wachovia.

Life brokerages agencies and IMOs had more than a faltering economy to contend with this past year. Market-watchers say that an increasingly competitive landscape has forced many of these firms to overhaul their business models with a view to achieving greater economies of scale, adapting to the needs of a more mobile and technology-savvy field force and strengthening relationships with producers.

To realize these objectives, Borden Hamman “dramatically” increased its capacity by hiring more “external wholesaler” reps who interface with producers to consult on clients’ product needs. The company also invested heavily in information technology to give producers faster access to product information on-the-go; and to develop a “virtual” workforce of wholesale reps.

“It used to be that you had to have people inside a brick-and-mortar building to make things happen,” says Ashwill. “Thanks to voice-over-IP and other Internet-based technologies, the way we do business has changed. Now, I can hire employees anywhere in the U.S and interface with them remotely. But these technologies have also raised expectations in that advisors and their customers now demand instant access to information.”

Capitas Financial, too, expanded its national footprint, albeit on a more decentralized basis. The limited liability company is owned by 29 partners who, while sharing products, technical expertise, sales materials and IT resources, independently run businesses in their respective cities. In 2008, the company boosted the marketing presence and field support to many of the metro areas where some 180 affiliated producers operate.

The firm, which had long specialized in estate planning and executive benefits, also expanded its portfolio to long-term care insurance, corporate- and bank-owned life insurance (COLI/BOLI) and life settlements products.

Yet another independent life brokerage that is betting its future on an expanded field force is Cavalier Associates of Westlake Village, Calif. One of 56 member firms in the Advantage Insurance Network, the company this past year boosted its staff by 30% and its producer base by 25%, bringing the total to 600 agents. That has allowed the firm to make up in sales volume what it has lost on a per-case basis due to the faltering economy.

“Personal net worths have fallen dramatically, and that’s translated into smaller life insurance policies for funding estate and business plans,” says Jason Cavalier, president of Cavalier Associates and a chief marketing officer at Advantage Insurance Network. “The largest slowdown has been among older clients in the affluent market.”

The firm’s shift toward greater volume and smaller case sizes has also heightened its focus on a long-underserved demographic: prospects occupying the middle income brackets. But Cavalier acknowledges that nabbing a larger share of this market will remain an uphill battle so long as insurance products remain a more complicated and time-consuming sale than that required for other financial products, such as bank CDs.

For Gary Baker, however, the key to boosting sales in the middle market–and attracting more producers to the firm–is to boost commission bonuses. To that end, Baker’s firm partnered this past year with Brokers Alliance, a Fountain Hills, Ariz.-based IMO that enjoys a high-volume business selling term and universal life, annuities and disability income insurance.

“By marrying with Brokers Alliance, I’ve been able to boost transactions, which in turn has allowed me to pay a higher percentage in sales commissions to agents,” says Baker. “And that’s gotten their attention.”