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Life Health > Life Insurance

The BGA business model in 2017 and beyond

By William J. Shelow

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As 2016 draws to a close and we prepare for the New Year, business owners view this time of year as the perfect opportunity to reflect on our successes and challenges to define our vision for 2017.

To get a better understanding of the challenges we faced and what lies ahead, LifeMark Partners, Inc., conducted a survey of our BGA partner agencies and captured input from industry leaders representing more than 45,000 individual producers reflecting upon the Brokerage General Agency model this year and for years to come.

THE CHALLENGES

Lack of Dedicated Life Insurance Agents
As those in our industry well know, there has been an evolution of the distribution of life insurance shifting away from career life insurance agents towards newer sources, such as independent wealth advisors, property and casualty and health insurance agents. As this diversification of service and product offerings is met with the timing of many of traditional life insurance agents reaching retirement, the undeniably biggest challenge facing the industry today is a shortage of new, trained agents to take their place. In fact, almost 45 percent of respondents think recruiting or wholesaling new agents was the most critical component to their business success in 2016. At the BGA level, this challenge has triggered a race to attract new, quality sources of distribution, and commission has been on the front lines driving margin compression to keep up with challenging payouts. This, in turn, creates a danger of shrinking profitability for BGAs who do not adapt and evolve to provide value-added benefits and unique service offerings to their producers beyond compensation.

Department of Labor Fiduciary Rule
This year also brought about landmark legislation with the Department of Labor fiduciary rule. For BGAs focused on annuity production, this means potential challenges for the placement of qualified assets starting in the year ahead, while life insurance focused agencies expect to see either minimal impact or increased opportunity to focus on the tax-advantaged accumulation aspects of the vehicle. While the insurance business has always been largely a relationship business, an added consideration as one of our partners has shared, “Our advisor relationships must expand from the advisor to the advisor’s institution. The biggest impact of DOL will be an accelerant of that change,” says Brian Kelley, President of Independent Planner’s Group.

WHAT HAS BEEN MOST EFFECTIVE FOR BGA SUCCESS IN 2016?

While these legislative and strained resource challenges are notable, I believe they directly translate to significant opportunity for BGAs who can recognize and embrace the changing landscape. In the survey, when asked what has been most important in attracting new agents and what has been most important in increasing business from current agents, there was an overwhelming consensus that beyond compensation, the most critical resources were the back-office support of: 

      1. Underwriting knowledge and expertise: At the core of life insurance, having the resources to quickly and efficiently place cases, whether preferred status or medically-impaired, large or otherwise difficult cases is an undeniable essential.
      2. Case design and product selection abilities: In a business that is “sold not bought,” being able to show compelling illustrations, leverage carrier relationships and identify product opportunities in a way that truly solves the needs of either strategic partners or end consumers is make or break.

By beefing up and staying on the cutting edge of these offerings, you can position your BGA to dominate in the New Year, both with attracting new — and retaining existing — distribution partners.

BIGGEST OPPORTUNITIES

Each and every BGA partner surveyed agreed that they anticipate changes and evolutions to their business models in the next five to 10 years, from refining their process to more extensive transformations. The following are some of the most critical areas of focus in the years ahead:

Expanding point of sale
Many of our partners anticipate substantial growth opportunity in the point of sale market, working on behalf of agents and advisors working directly with the end client to advise and implement policies for their personal and business life insurance needs. “BGA’s need to partner with firms that have direct access to the life insurance buyers,” says Tim Gilder, Principal of Comprehensive Planning, Inc. “Point of sale support, call center support, technology platforms, etc. — all of these models separately or in combination will be leveraged to provide easy and profitable insurance solutions for these partner firms.”

Word to the wise: the most critical key to success with these point of sales opportunities will be creating and maintaining trust. Be sure to treat direct communication with a strategic partner’s customer as a privileged opportunity for a long-term and mutually beneficial relationship.

Improving technology
Throughout the financial services industry, technology will continue to help standardize, systematize and automate business operations, and BGAs are no exception. From marketing to applications to case management, innovations are developing to expedite and expand life insurance distribution at a global scale.

“The aging of the BGA market will create an opportunity to consolidate and for us to move into other geographical markets,” says Ray Hunt, Vice President of Dixon Wells. “New technology in accelerated underwriting and jet issue will allow for producers to get paid quicker and will keep more producers in the business.”

Niche marketing
The BGA role in the sales process cannot just be one of the traditional wholesale fulfillment process. If you are just taking orders, you are not creating unique value. From farmland to foreign national policies, identifying unique areas of expertise in the life insurance arena is a prime opportunity to create new market share and manage margins.

While high net worth individuals have long been benefactors of the many estate planning benefits of life insurance, technology advances driven by BGAs, IMOs and carriers alike, are likely to create new opportunity with the huge underserved middle market.

“We believe that technology will continue to change the way life insurance is distributed to the mass affluent and middle markets, specifically as the millennials continue to emerge as a buying force,” says Gonzalo Garcia, Partner, Agency One. “We do not believe, however, that the high net worth and ultra-high net worth market will be as affected and will require a competent professional who specializes in estate and succession planning to serve their needs. This is our market and we continue to carve out a niche for our agency in this space.”

Fostering existing relationships
I cannot say it enough that we are in a business of relationships. What that means for your BGA may range from prioritizing and even eliminating unproductive relationships to drilling down to provide expanded and improved service to your valued agents and partners.

“We are partnering with agents at a deeper level and helping them with more aspects of the sale than we have before,” says Eric Griffin, VP of Sales, The Cason Group, Inc. “In exchange for that, they are more open to allowing us to help them mine their book of business for better opportunities, rather than just writing business re-actively.”

WHERE WILL BGAs BE IN YEARS TO COME?

With great challenges, comes great opportunity, and through the collaboration and partnership of BGAs, IMOs and carriers alike, I am confident in the future of our industry. Agencies who are willing to invest in their businesses through technology platforms as well as expanding human capital to expand into multiple sources of distribution are primed and positioned for long-term and meaningful success. The BGAs of the future will be the best in providing value to the multiple distribution arenas. As distribution evolves, whether in wholesale or retail, we will play a prominent role. The words of Jan Pinney, CEO of Pinney Insurance Center, Inc., well summarize my sentiment in saying, “There will be an Uber moment in the insurance industry, and we intend to be there to take advantage of it, if not actually create it ourselves.”

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