As the number of Wily Loman style insurance agents shrinks, Tower Group thinks US insurers should distribute via banks and wirehouses instead. “It’s imperative that insurers approach this market with a fresh perspective relative to products, distribution and operations,” says Cindy Saccocia, a senior analyst in the insurance practice at TowerGroup and author of new research on insurance distribution. “The distribution of life insurance through nontraditional channels is an area of growth for those insurers willing to invest in long- term opportunities.”
Tower Group says that life insurance distribution remains concentrated with independent and “captive” agents, which means that ears with strong market share in these areas will continue to drive life sales in the near term. However, with the number of career agents on the decline, insurers must begin to penetrate other distribution channels and reach new advisers to increase sales. To promote sales through other channels and grow this area of the business, insurers must concentrate on education, wholesaling and sales support — as well as address the increased operational complexities that accompany each new distributor added to their networks.
TowerGroup estimates that 50-75% of financial planners and independent agents associated with insurance do business with multiple carriers. The ease of “defection” among agents and advisors underscores the need for insurers to advance their operations and offer a compelling range of services. The strategic use of technology to strengthen these distributor relationships can provide a significant competitive weapon. Just as insurers must reach out through nontraditional channels, financial institutions looking to expand their product suite to meet customer demands for asset protection and retirement income should consider forging partnerships with insurers to offer insurance products such as life, income annuities and traditional property insurance. “Current US demographics portend pent-up demand for insurance products,” Saccocia added. “An investment today by carriers in technology to streamline and further automate operations will pay hefty dividends in terms of competitive differentiation.”