One of the things that has struck me in the nine months or so since I have started covering the life/health industry, is just how precarious the situation is for life/health agents. Between a harsh economy, fickle client needs and regulatory upheaval, it has been a turbulent time for L/H agents, to say the very least. And now, the war has opened up on another front, it seems: market competition from property/casualty agents.
It seems weird, but according to the Hartford’s Retirement Plans Group, it made some $230 million in sales of defined contribution retirement plans through its P/C sales force in 2010, and it definitely senses an opportunity to keep the ball rolling in that direction. Earlier this week, the Hartford announced plans to accelerate its retirement distribtion strategy by forming a Channel Development team to further support the efforts of its P/C agents as they sell what many might consider to be traditional L/H products. We’re mainly talking about providing defined contribution (401(k), 403(b) and 457) plans and defined benefit (cash balance) plans for employers and their employees. It’s not exactly L/H bread and butter, but it is a warning sign. If you’re used to dealing with Emily your P/C agent at work to tool up your 401(k), who will you feel more comfortable talking over an annuity with? Emily, who is already walking you through the first stages of retirement planning, or Jake your local life agent who is having a hard enough time getting you to buy adequate life insurance, let along additional retirement planning?
You can’t blame the Hartford for thinking like this. After all, their P/C force quintupled its sales of defined contribution retirement plans over the last four years – the length of the Great Recession – at a time when sales of similar products have taken hit after hit after hit.
I find this story from the Hartford especially interesting for a few reasons. One, the Hartford is making a strong effort to support its sales staff in the field, while the L/H industry seems to have scaled back on such efforts. What we’ve got here is some 11,000 Hartford agents getting direct assistance from dedicated business managers who can help the agents determine retirement needs of businesses and coordinating whatever resources agents need to make sales to those businesses. Traditionally, the Hartford has done this with financial advisors and third-party administrators. But over the last four years – the length of the Great Recession, I’d like to add – Hartford P/C agents have quintupled their sales of defined retirement contribution plans, leveraging their relationships with existing clients to make new sales opportunities. With that kind of track record, why wouldn’t the Hartford throw more support behind the P/C force?
I also find it interesting that the Hartford is using its P/C guys to make an opportunity out of the ever-growing field of employee benefits, which has long straddled the line between life/health on one hand (owing to its life, health and financial planning aspect) and property/casualty on the other (owing to the sheer size of the spend there, which brings the P/C risk managers - and their P/C insurance contacts – into the mix).
“Retirement plans are increasingly being sold by P&C agents as part of their efforts to meet a broader range of needs for America’s businesses,” said Sharon Ritchey, executive vice president and director of the Retirement Plans Group. “Property-casualty agents who have successfully expanded their product portfolio to include retirement products see the strategy as an opportunity to deepen relationships with their business customers and create new sources of revenue.”
If that is not a shot across the bow of L/H agents, I don’t know what is. But this alone is no cause for major worry, I think. What is, is that this is not the only such potential encroachment on L/H turf. Just last week, I spoke with Jesse Slome, the head of the American Association for Critical Illness Insurance (AACII), and he felt, unsurprisingly, that critical illness coverage represented a huge opportunity that the L/H world is currently missing out on. According to Slome, mose L/H agents try to sell large CII policies to affluent clients, when the reality of this product is that most CII policies sold are for $20,000 or less, making it a completely different kind of sell for a completely different kind of client. Slome felt that an obvious place to sell this kind of thing is as a tack-on to residential mortgages as a kind of payment protection plan. Who wouldn’t pay a few extra bucks a month to know that if they get sick for a year, their house payments will be covered, Slome asks. Good question.
It is hard to imagine a young family committing to a half-million-dollar, 30-year commitment and not paying another few dollars a month for that kind fo security. Not after we all witnessed the wave of foreclosures that swept the land when the subprime bubble burst. Nowadays even good lending risks tend to wonder how subprime they might really be, and with that in mind, CII suddenly becomes appealing. but more importantly, it becomes the kind of thing that banks can sell in a way that L/H agents cannot, and therein lies the rub. While CII has never become the big segment that folks like Slome would like it to be, it’s looking ever more likely that if it does, it won’t be the L/H agents who do it. And that is a real shame, because the L/H world has enough problems to contend with without missing golden opportunities like this one.
We all know that the age of the prosperous single-product practice is not what it used to be. I get letters all the time from folks who openly worry about the viability of their practices, and who only just now are trying like crazy to diversify and be able to sell a wide variety of solutions to their clients. That will not be easy, but I am confident most L/H agents are up to the task. The thing is, will the market give them the time they need to skill up and diversify their expertise before external markets come in and gobble up the rest of the pie? It’s tough to say. but the clock is ticking, people. Time to get a move on while the getting is good.