The insurance business is undergoing a seismic change. For the past several years, there has been a significant migration of insurance intermediaries — that is, agents, brokers, and others who sell insurance products — away from many of the traditional insurance carriers. Often, the cause of this shift is the large number of products from those carriers that offer relatively low value and returns to consumers and are, therefore, frequently “unsellable.”
This migration has been an important factor in the development of numerous new inter-company agreements, or “deals,” between traditional insurance companies and mid-market specialists, as these companies try to find new ways to secure new premium growth and increased profitability. Some of these inter-company arrangements end up becoming traditional merger and acquisition deals, but many others are marketing partnerships or consultancy arrangements of one kind or another.
These kinds of arrangements, though not new, do seem to be picking up a lot of momentum. The increasing interest in these inter-company deals has led to the emergence of many traditional insurance companies swimming in new waters, and these ventures into a new way of doing business are always easier when they’re aided by personal relationships and personal networks.
It’s not news that industry organizations and conferences help foster these kinds of relationships and networks. For me and my firm, and for many others like us, the Inter-Company Marketing Group (ICMG) is one such organization. As the name suggests, their reason for being is to foster relationships that lead to inter-company marketing arrangements, and their annual meeting is one of the best for the purposes of networking.
If you’re unfamiliar with the way inter-company deals might work, there are actually many, many ways that a deal can develop — as many ways as there are companies with different business approaches. Likewise, there can be many reasons why a specific deal might develop in the first place. In general, these inter-company deals happen when Company A has a product or market or distribution system in place, as does Company B, and the people at the two companies see the value in putting their heads and resources together to complete a marketing agreement that will benefit both firms.
These new inter-company collaborations are typically forged by a chief executive officer or a chief marketing officer who is seeking to expand the opportunities available to his or her known brand. For example, the chief marketing officer may have a very strong critical illness product, but his or her company has no annuities for the firm’s producers to sell. If he or she develops a relationship with another marketing officer and learns that the second company has a great series of annuities and a field force that would love to have a solid critical illness policy to sell, the value of a marketing partnership between the two becomes clear.
But it takes time to learn what companies have to offer and what they’re looking for, and it takes time to build the kind of trusted relationships that enable all the players involved to feel comfortable entering into an inter-company agreement.
I personally have been involved in a full spectrum of these kinds of arrangements over the years, in association with the largest of institutions to mid-sized family owned businesses. One of our more successful inter-company deals was with a major United States insurer that was looking to supplement its worksite business with direct sales. Within 12 months, we added 20 percent to their in-force premium and achieved response rates from existing policyholders of somewhere in the range of 5 percent to 40 percent, depending upon the type of product offered.
Admittedly, that was one of our bigger successes. On a smaller scale, in another of our inter-company relationships, a mid-western company with a handful of state approvals and an unusual product was seeking a good method to upgrade coverages. This company, like ours, was and is still a regular attendee at the ICMG annual meeting, and we originally met them at that conference. We got to know one another — and our mutual strengths — and we have since created a program that is doubling the face amount owned on 30 percent of the company’s policyholders.
Like all business decisions, inter-company deals can bring potential problems as well. For my firm that I recently retired from, there are always two primary concerns when we consider entering into an inter-company marketing arrangement — channel conflict and information technology (IT) resources. Both concerns are usually surmountable, but institutions have to open their eyes and see the potential of the new business before they will commit.
Sadly, many companies hide behind these kinds of walls, doing themselves a great injustice by limiting their own potential for growth. Often, for many companies, an attitude that looks down upon products or marketing ideas that are “Not Invented Here” can be a major stumbling block to growth and new levels of success.
For companies that do decide to enter into these kinds of inter-company marketing arrangements, everyone involved can benefit. These kinds of arrangements can bring in new premium and profit for the insurer, new leads and commissions for the intermediaries, and much-needed improvements in coverage for consumers. Almost everyone in the insurance business recognizes the severe underinsurance problem among their policyholders and the general population. The kind of marketing partnerships our company and others have made with one another have gone a long way to help resolve this issue to the satisfaction of all — in particular to the benefit of the consumer.
Clearly, the future will bring us many more mergers, acquisitions, and business partnerships designed to address the very severely underserved mid-market. It makes good sense for the long-term viability of the business that every insurer and service provider makes itself and its needs known to the rest of the industry. And it makes good sense that companies with complementary objectives give serious consideration to working with one another for the good of themselves, the business, and those we all serve.