The Department of Labor’s new fiduciary rule will could depress sales for brokers and agents by forcing a consolidation of the independent channel’s players, a new report warns.
Global investment management firm Conning & Co. discloses this finding in “LifeAnnuity Distribution & Marketing Annual: Confronting a Distribution Challenge, 2016 Edition.” The study examines the implications of the DOL fiduciary rule on distribution, including the rule’s impact on insurers and how they might respond.
Part of Conning’s “Strategic Study Series,” the report bases its findings on statutory data and a proprietary analysis of individual life and annuity sales by product and channel from 2011 through 2015. Conning also provides a product-level sales forecast through 2018.
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“The new [fiduciary] rule is likely to decrease distributor revenue, potentially accelerate distributor consolidation, and increase insurer competition for distributor shelf space,” the report states. “Life-annuity insurers may [also] face a dynamic and confusing distribution landscape… Navigating that landscape, while minimizing any negative sales impact, will be crucial.”
The report notes the rule will not affect all insurers evenly.
Robo-advisors continue to attract funding and form partnerships with traditional bricks and mortar distributors. The DOL rule could “accelerate that development over the coming years” and “reinforce” the need for regulatory standards governing automated investment advisory services.
The study adds that small and mid-sized insurers are “closing the gap” with large carriers in respect to social media usage. The report also flags growth opportunities for insurers to promote their products through mobile apps.
“We continue to find a strong preference for distributor apps over consumer apps” among the top 25 life-annuity insurers, the report states. “That said, announcements by some large insurers involved in the retirement plan markets may indicate the growing use of mobile apps as a feature to attract plan sponsors and plan members.”
Eye on Expenses
Based on statutory data, the study adds, life-annuity insurers reported a slight increase in advertising expenses in 2015 from 2014. As in prior years, 10 insurers identified in the report “accounted for the majority” of insurers’ advertising expenses.