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August 22, 2013 at 09:36 PM
The stunning announcement on August 5th of The Washington Post‘s acquisition by Amazon.com Founder and CEO Jeffrey Bezos could be a harbinger of big things to come — and not only for failing newspapers.
The buyout could also portend a revolution, potentially led by Amazon and other technology titans, in the distribution of products across a range of industries, among them professional services like insurance and financial planning. For career and independent producers, the $64,000 question is whether they’ll have a place in this new paradigm.
Near-term, I would say. But peer into a crystal ball a decade or so out and the prospect of licensed call center agents replacing field producers in the marketing and sale of life insurance products — most especially term life products — seems disconcertingly real.
How Realistic?
Currently, the web is chock full of sites, many run by carriers, others by third-party aggregators, where consumers can get policy quotes. According to market research firm LIMRA, about one in five life insurance policies sold originates through a direct sales channel.
To my knowledge, however, most of these portals are simply lead-generation sites that pay the agent facilitating the policy application and sale a standard “heaped” or up-front commission. As a result, the policy premium is the same whether an applicant buys “direct” or through a face-to-face meeting with an agent, as the ladder’s commission on the sale is built into the price.
Why haven’t insurers who have direct sales portals dispensed with this compensation structure? Presumably, substituting levelized or trailing commissions for the traditional payout method would be to their advantage, as they could boost sales and their products’ internal rate of return and, thus, the price to the consumer.
Much to the relief of producers, however, insurers have maintained the status quo. The key reason: A truly direct sales channel offering lower priced products would engender channel conflict. The more product they push through direct sales, the more they would cannibalize the sales of affiliated agents and brokers — the very people they now depend on for their revenues. And, clearly, alienating a company’s field sales force is not something that most insurers wish to contemplate.
Onward march of technology
