Consider this scenario: Widespread lack of trust in large financial institutions, a prolonged economic slump and a resurgence in the collective yearning for the ties that unite and define us.

These are the times we live in now. These were the times 140 years ago when belonging to a fraternal organization and buying its insurance policies was more the norm than the exception. In fact, for the immigrants that flocked to America to seek opportunity and build a nation, fraternals were the only organizations that would offer them life insurance protection.

Historically, fraternals thrived when times were tough and the need for community was great. The time is right now for fraternals to refine their mission, promote the valuable but often overlooked contributions they make to communities, recruit new agents and members, and engineer a rebirth.

Rejuvenating relevance

In 1909, fraternals provided about half of all the life insurance in the United States. Today, societies write about 2% of the U.S. life insurance market. Yet more than 9 million Americans are fraternal members and fraternal insurers were the only segment of the industry whose market share grew in the first quarter of 2009, according to a recent study by Life Insurance Marketing and Research Association.

Why did fraternals decline over the last century?

Fraternals were the first social security system-people who shared a common bond (ethnic, religious or patriotic values) joining together to take care of themselves because government programs did not exist. Membership in fraternals grew during the Great Depression, but market share decreased with the creation of social welfare programs such as Social Security.

Over time and several generations, many of the ethnic bonds that defined communities eroded, making individuals less connected and reliant on each other. At the same time, commercial insurers changed their practices and began insuring groups they previously denied.

The way we socialize changed from the face-to-face gatherings fraternals provided to indirect interaction via TV, e-mail, texting and social networking websites such as Facebook.

Many fraternals clung to the old ways and failed to change with the times, never updating their products or distribution systems–making them seem archaic and irrelevant to potential members.

With severe limitations on ways to effectively raise capital, many groups struggled to obtain the financial resources they needed to compete effectively with commercial insurers.

Reason for revival

Having said that, many societies are reversing this trend by changing their operational and governance practices. They are transforming themselves into a viable life insurance option for consumers and an important source of social services for both members and the communities in which they live and work.

In addition to the July 2009 LIMRA study, which found that first quarter fraternal insurers’ sales increased by 26%, while mutual insurers experienced a decrease of 7% and stock companies’ sales fell by 31%, there is other evidence that progressive fraternals can carve out an important niche as providers of financial and community services.

A recent study by the Forrester’s consulting group indicated that the most successful organizations are those that sell multiple products to their customers. Those that do it best, according to the study, are organizations such as credit unions. No doubt this is due largely to the shared bond and enhanced level of trust between these organizations and their members–a characteristic that is the cornerstone of fraternals.

Fraternals still represent one of the most potent and cost effective community and social services distribution networks in the U.S. In 2008, National Fraternal Congress of America member societies gave more than $420 million in direct financial assistance to organizations such as Special Olympics, Habitat for Humanity, Red Cross and Children’s Miracle Network. More importantly, members contributed more than 90 million hours to volunteer projects-worth more than $1.9 billion-to support good works in communities across the country.

An important market for the right kind of agent

For agents, the common bonds of fraternal societies-whether religious, ethnic, occupational, or simply a shared set of family values-can open new marketing doors within communities. Independent agents who represent one or more societies can raise their professional profile, tap in to new markets, and join together with members and clients to become a powerful force for good in the U.S.

Fraternals don’t sell policies, they sell membership. And the community service projects in which they engage members-combined with competitively priced financial services products-make them an attractive option for consumers.

Fraternals are often overlooked and frequently misunderstood. It’s time for societies and agents to join forces to enhance awareness of the fraternal option and sow the seeds for a fraternal Renaissance.

Joseph Annotti is president and CEO of the National Fraternal Congress of America. His email address is jannotti@nfcanet.org.