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.
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:
- 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.
- 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.
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.