Dealing With Orphan Policyholders

An orphan in insurance industry parlance is a policyholder whose original agent is no longer an active agent for the company that issued the policy. Sometimes they are referred to as unassigned policyholders.

In many cases, the agent who originally sold the policy or contract is no longer in the industry. In some cases, the agent may still be active but may have moved to another company and not kept his or her contract or selling agreement with the original company. In this case, the policyholder may still have contact with the agent, but the agent cannot fully service the client’s needs, due to a lack of a relationship with the original issuing company.

Another way orphans are created is when the agent moves into management and no longer actively sells or services his clients. However, the bulk of orphans are created when the agent leaves the business because of poor production, company mergers or to seek new opportunities.

Statistics vary about how many policyholders are orphans with figures being reported as high as 50% for some companies. In an economic downturn more agents tend to leave the business, which creates more orphans. This suggests that the number of orphans likely has increased over the last several years.

Many companies and general agents assign agents to service orphans since an orphan can be a potential sales lead. In some cases there may be an economic value to assigning an orphan because of commissions or fees, but in most cases orphans present no current value, but only the potential for commissions from future sales.

Most agents are ambivalent about contacting orphans. On one hand, there is a potentially favorable basis for a relationship since the orphan has maintained his policy even though the original agent is no longer servicing the policy. An agent is more likely to obtain a meeting with an orphan than a cold call prospect because of the opportunity to provide service by reviewing the products owned by the orphan. A new agent can strengthen his relationship with the orphan by resolving service issues. An orphan’s needs change over time and there are new opportunities for sales.

On the other hand, the orphan may be negatively predisposed toward the company and agents, in general, due to frustration with unmet expectations and lack of contact or service.

From a compliance standpoint, contacting orphans can be risky since the agent can get sucked into compliance issues which are not his responsibility or fault. An agent can stumble into a compliance problem and have a complaint lodged against him that actually reflects the orphan’s frustration and dissatisfaction with the prior agent or company. Problems with prior sales and dissatisfaction with prior agents or the current company and ongoing service issues can become a burden in terms of time and energy.

However, orphans can be a valuable source of new sales, so agents need to have a strategy for dealing with them that avoids compliance issues.

Preparation

In most cases the new agent does not have a client file that provides information on the orphan or products sold in the past. Most agents find that with orphans they know payment history, policy value and a few other facts about the policy, but do not know the rationale for the original sale.

To prepare for a meeting with an orphan, the new agent should do some research. With electronic records it may take some effort to get a copy of original applications, forms or files. The agent should have a list of all policies the orphan has with the company as well as with other family members. He should review the orphan’s records to identify any prior problems-missed payments, billing errors, etc. He should also generate a new in-force illustration. If the agent is unfamiliar with the features and benefits of the policies sold to the orphan, he should learn about them by contacting the company.

Dealing with issues raised in the initial meeting with the orphan

The key goal of a first meeting with the orphan is to re-establish a positive relationship. Agents need to be prepared for a disgruntled policyholder. They need to be sensitive and not defensive if the orphan is critical of the company, general agent, prior agent, etc. The agent’s excuses for lack of contact or service may not satisfy the orphan and the agent needs to avoid further antagonizing the orphan. If a positive relationship cannot be established, the agent’s best course of action is probably to gracefully exit the interview.

The agent should review product changes, investment results, policy values, etc. since the product was purchased. It is important to provide information on any features, benefits or conversion privileges, etc. of which the orphan may not be aware.