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How to work with a BGA

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Traditionally, life insurance has been sold through insurance agents hired by a company to sell products. In exchange, a life insurance company provided its agents with training, support and benefits. This agency system thrived throughout much of the 20th century and gave rise to the multibillion-dollar life insurance market that exists today.

The Internet has changed the life insurance industry significantly in the last two decades, and the traditional agency system has given way to an increasingly popular independent structure for life agents.

With information and pricing readily available, many consumers now expect life insurance agents to market policies from multiple companies. Rather than contracting with one specific company, many agents have become brokers so they can offer clients the best deals available.

When many life insurance companies abandoned the captive agent system, they also gave up much of their valuable agent support, most of which is now in the hands of the brokerage agency where an agent is contracted. This makes it more important than ever for the independent agent to select a brokerage agency that provides not only excellent compensation but also the support necessary for career and business advancement.

Many independent life agents these days fall into one of three categories: those who work for non-life insurance agencies, investment advisors, and trustees and estate planning attorneys. It’s important, then, that they select the appropriate brokerage agency to meet their needs — one that provides the best access to information so they can offer clients the most attractive options available.

1. Non-life insurance agencies

Insurance agencies that have not typically sold life insurance — particularly P&C and health insurance agencies — have been a major source of increased business for some life insurance brokerage agencies. The margins for these lines of business have been squeezed in the past few years due to increased competition and government regulations. As a result, many of these agencies have looked to make up for lost revenue by adding additional lines of business, including life insurance.

Typically, one of the most important considerations for these agencies when dealing with a brokerage agency is service. Obviously, their core business is of primary importance; they don’t want to jeopardize client relationships when adding life insurance to their offerings.

A primary consideration is having confidence that the brokerage agency will take care of their clients the way they would if they were selling one of their core products. This is why a brokerage agency must provide agents with the tools that help assure quality service: online case access so agents can check on the progress of their cases in underwriting, accessibility to the life insurance companies for in-force policy information, and timely updates if issues arise during the underwriting process.

Another added value brokerage agencies can provide to P&C agencies and other non-life shops is access to carriers offering tailored programs to help them grow their business.

Particularly for P&C agencies, many life insurance companies have designed marketing platforms that aid the agency in letting its client base know it also provides life insurance. It’s incumbent on the brokerage agency to be familiar with the various programs and to introduce agencies to the best solutions available to them.

Agencies with little or no experience selling life insurance are also concerned with their lack of familiarity with life insurance products and how best to position them with clients. This is why it’s important to find a brokerage agency with an experienced staff that can guide inexperienced agents through the process and make sure the agency is asking clients the right questions to uncover their life insurance needs.

2. Investment advisors

A second and growing non-traditional outlet for life insurance sales is investment advisors. With the movement toward holistic financial planning, more investment advisors are adding life insurance to their client services.

It is important for these professionals to find a brokerage agency that understands where life insurance fits into a client’s overall financial plan. Today, brokerage agencies are asked to go beyond filling orders. They should also be able to make recommendations as to which products best fit client needs and the appropriate amount of coverage.

It’s worth noting that an investment advisor may be using software for creating client investment plans that does not include life insurance in the analysis. Therefore, it’s important to find a brokerage agency with robust capabilities for analyzing life insurance needs, not only for family protection but also for estate and charitable planning.

Additionally, it’s vital for the brokerage agency to stay abreast of the constant changes in tax and estate planning and verify the solutions presented to the client are appropriate.

Also, investment advisors often look for guidance in carrier selection. Many are appointed by broker-dealers with a limited selection of approved life insurance companies. In these instances, the brokerage agency must be familiar with all of the companies the advisor can represent and make sound recommendations based on those parameters.

Similarly, some broker-dealers limit the types of policies their appointed agents are allowed to see. This adds another layer of complexity for a brokerage agency when making recommendations for clients. It’s of the utmost importance for a brokerage agency to stay on top of new products so they can keep their advisors informed.

3. Trustees and estate planning attorneys

For trustees and estate planning attorneys involved in selecting insurance policies on behalf of their clients, choosing the appropriate brokerage agency is an important decision.

When dealing with estate planning issues over the past decade, there has been a tendency to solve life insurance needs with guaranteed policies. However, because of the fiduciary duty that exists on the part of trustees and attorneys, recent court cases have led to the requirement to at least analyze and present other available options. The trustee or attorney must be able to prove a full analysis was performed and clients made an informed decision about their course of action.

Due to the increased scrutiny being given these professionals, it is important they work with brokerage agencies that have an in-depth knowledge of the issues they face today.

The primary concern is that the brokerage agency is giving all available options for solving client needs, rather than just offering one solution. It’s pivotal that the trustee or attorney justify the implemented solution, as well as show other options were given to the client. Otherwise, they could face a significant liability if the beneficiaries should come looking for an explanation of why one plan was chosen over another.

In the same way, one of a trustee’s duties is to complete a periodic due diligence to make sure the life insurance plan is performing as originally designed. It is here that the proper brokerage agency can be an invaluable partner if it has in-force policy analysis software to provide assurance that the current policy is the most effective solution for a client’s needs. The software not only analyzes how well the policy is performing currently, but also indicates how well the policy should perform in the future compared to other options in the marketplace. This service can give peace of mind to insurance professionals with a fiduciary responsibility.

In a world of change, it’s increasingly important for professionals in every industry to provide clients with the best available options. If they don’t have the most accurate information available, their clients can often go out and find the information on their own, something that can create very awkward situations.

When it comes to the life insurance industry and the increasing movement toward brokerage channels, agents’ selection of a brokerage agency can have a dramatic impact on their business.

The overarching theme across the three outlets for insurance agents is that a brokerage agency needs to address a multitude of needs. If the correct partnership is chosen, then it can add significantly to the bottom line and, at the same time, ensure clients receive the best possible solutions available.

See also:

7 keys to creating a great BGA partnership

5 questions every advisor should ask a brokerage general agency

Estate planning in a post-fiscal cliff world