The Future Is Here - Now What Do We Do?

January 20, 2012

By Ray Ohlson

There are many challenges facing the life insurance and the annuity business today. All one has to do is Google challenges facing our industry and you will be able to spend the next month reading. But, is everyone reading and listening? I am not sure.
The industry experts have been warning us of the severe distribution challenges that our industry will incur. Yes, go back to all the important meetings and conferences in the year 2000 and you will find the same topics we are discussing today. What is the industry doing about this? Are they throwing in the towel or building alternative distribution strategies? Or, are the companies too interested in their quarterly earnings report to invest in the future?

Believe me, I know it is not easy. I had the opportunity of being involved in buying several life insurance companies and serving as president of two of them. We always faced regulatory challenges, but now those challenges are greater. We also fought to find financial instruments that would give us a good rate of return and not place our company in harm’s way. Plus, we had to make sure that we gave the policy owner a square deal. Oh, lest I forget … we also had to take care of the agent, because, as the old saying goes, “nothing happens until somebody sells something.” So, let’s agree that there are many challenges; however, for the sake of this discussion, I would like to look at two questions: “Who’s going to sell this stuff” and “Why are sales down and agents depressed?” Let’s go!
I have the great pleasure of being friends with officers of insurance companies (friends in high places). We often discuss where things are going in our industry. These industry leaders worry about distribution and, for the most part, are trying to figure out how they can stay in the game with a dwindling supply of agents. Now, this situation does not apply to the career companies. They are sitting in the catbird seat. They recruit quality people and invest in marketing, research, and education. They will control the market. But, there are ways to grow the independent channels.
The question remains, “will we do this on our own?” You know how it works: the company goes one way and the producers go another. Or, will we do this with a partnership philosophy. I believe the future is bright for the carriers that reach out to the producers and offer systems to help them raise their practices to the next level. But, this would also require that the producers give their all to that carrier. Let’s look a little deeper.
Online purchases of life insurance and annuities are a reality. It’s happening now and will increase rapidly. We will see clients purchasing permanent insurance and annuities online with an “agency assisted sale.” The reason is simple: these clients want what we have, but they have fewer agents to work with, and will have even fewer agents in the near future. However, keep in mind that this baby boomer market is huge, and we are just at the beginning of the movement. We have the opportunity to establish ourselves as the “go-to people” with this crowd of motivated, qualified buyers.
Therefore, independent operations have a truly golden opportunity to recruit to these clients. In the near term, I see independents hiring one or two college graduates to help with their practice, and ultimately they will develop a succession plan. The younger agent will bring in younger clients, and that’s how our industry will start to grow again. But, what is the industry doing now?  Let’s look.
It appears that the insurance companies believe that increasing the commission, raising a cap, putting bonuses on products, and giving away free trips will win the day. Well, those activities may win the day, but they will not win the future. Agents need business building assistance. They need help in making presentations. They need frank dialogue about how the agents make money. The insurance companies need to develop products that we would sell to our mothers. In other words, the insurance companies need to align with marketing organizations that buy into their philosophy of providing assistance in marketing, research, and education. They must all operate under the four principles of: service, credibility integrity and profitability for all parties in the financial service transaction.

This is hard, time-consuming, and expensive work. I know because that is what we are doing now. But, not all agents believe that it is for real. They don’t feel a closeness or trust with the insurance carriers. Why should they? The only time they hear from most of those companies is when there is a procedural change or a consumer complaint. It’s time for all of us to get together. Some companies will not be concerned as they will merge, sell, or buy others. Consolidation in our industry will ramp up. Some marketing companies won’t be interested for the same reasons. They are planning to sell or may have already sold their companies. So, we all need frank and open conversations … like adults. The challenges I have been talking about for the past ten years are here. We can no longer sweep them under the rug. All of us are becoming aware of these issues and are starting to feel the pain.

Let's not allow this tremendous industry lose what has made it so incredible. Life insurance and annuity sales professionals are the best in the world. We sell tremendous products and offer a great service value. So, let’s start talking! The time for action is now! 

Raymond J. Ohlson, CLU, is president & CEO of The Ohlson Group,

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