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Carriers actively exploring alternative distribution

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We all know life insurance ownership is at a 50-year low, and there are fewer agents out there working the underinsured/uninsured middle market. As this doesn’t figure to change anytime soon, carriers are actively seeking to expand distribution to middle-market consumers through new strategic alliances with non-traditional organizations.

Perhaps the most obvious example of this is the partnership announced in October 2012 between MetLife and Walmart, where MetLife is marketing pre-paid one-year term life policies in around 200 Walmart stores in Georgia and South Carolina.

As of late March, MetLife had no official comment on how the program, still in the pilot phase, is going. But Senior VP of Consumer Direct Business at MetLife Manish Bhatt did offer this insight to the Atlanta Journal-Constitution for an article shortly after the program was unveiled: “We believe more people want to buy insurance and be on sound financial footing but they run into so many barriers. Some don’t want to talk to agents. Some find it confusing. By simplifying it and putting it in Walmart, it will make it easy for people to get started.”

The Walmart program is about as basic as it gets, offering just two coverage options: a death benefit of either $10,000 or $25,000, with prices for the coverage varying by age. An 18- to 44-year-old man can purchase a one-year policy for $69, while a 60- to 65-year-old could purchase a $25,000 policy for $429. Once the customer decides between the coverage amount and buys the pre-paid card, they call a toll-free MetLife number to answer some medical questions. If the customer qualifies, the policy is activated. If not, the customer gets a full refund at Walmart.

The rates for coverage in the program are not competitive with what the customer could secure by visiting any number of online term life quote sites, but that’s not really the point. The program tries to make it as convenient and simple as possible to obtain minimal life insurance coverage. If it works well enough for MetLife and Walmart, expect the program to expand to more stores with more coverage options. And at the very least, the visibility of having this option available at Walmart can help raise awareness among the middle class that they need life insurance.

At the LIMRA Distribution Conference in February, an exec from another major carrier told attendees they hope this MetLife/Walmart pilot program works, and that they have been in discussions with a large department store chain about setting up “a store within a store,” similar to the Walmart program.

Unlike in years past, carriers today are not so afraid to explore alternative distribution strategies such as this for fear of upsetting producers in traditional channels. Some carriers are clearly over that concern, even if it does still upset many producers. Without enough agents to contact middle-market consumers, expect to see carriers conduct even more exploration into alternative distribution channels, including banks and established online and/or brick-and-mortar retailers.

With no clear solution to the problem of the declining numbers of independent producers, carriers are also looking at the potential of financial advisors from investment firms such as Edward Jones, Merrill Lynch, Raymond James and others to become the next generation of people selling life insurance.

Programs like the MetLife/Walmart one have big obstacles to overcome — it is expensive, one-year only coverage with minimal death benefits — but it is most definitely an example of carriers experimenting to see what might work.

As 2013 rolls on, I would expect we’ll hear about other direct-to-consumer initiatives designed to appeal to middle-market consumers.

For more from Brian Anderson, see:

Producers and technology: Overcoming adoption hurdles

Paper apps: Love ’em or leave ’em

Addressing the talent gap: Way to go, Ohio