C
ompared to other types of
insurance businesses, bro-
kerage is a relatively new
industry. It came into being less
than 40 years ago. Before then,
consumers purchased life insurance
through an agent who represented
just one carrier. If that carrier did
not offer policies appropriate for
that consumer, the consumer would
have to contact another dedicated
agent who handled a different car-
rier’s policies.
Once brokerage began, individ-
ual local agents could offer easy
convenience in finding policies for
virtually every potential policy-
holder. That’s because those agents
work with brokerage general agents
(BGAs) who represent multiple carri-
ers. BGAs use the case information
gathered by producers to find the
best policy for each person’s situ-
ation by looking at products from
several carriers.
What would happen now if bro-
kerage ceased to exist? How would
people buy life insurance? Let’s see
what some industry experts have to
say.
Limited choices and
increased marketing costs
“I can’t imagine a scenario where
brokerage would cease to exist,”
said Butch Britton, retired CEO of
ING (now Voya) U.S.’s Insurance
Solutions and past Mooers Award
recipient. “But if it did, the choice
offered by brokerage distribution
would cease to exist for clients and
they most likely would be limited
in choices for their insurance solu-
tions. They could not be sure they
received the best solution for their
insurance needs. The choice as pro-
vided by brokers’ distribution is very
viable.”
“Although many outlets have tried
to direct clients/consumers to more
transaction types of products and
online solutions, many life insur-
ance policies still need to be ‘sold,”
Colleen Horner, VP, National Ac-
counts, BGA Distribution at Nation-
wide pointed out. “The brokerage
environment offers producers many
products and services, allowing the
producer to provide unbiased solu-
tions based on consumer needs.”
She sees one key advantage of the
brokerage marketplace is its ability
to provide many solutions from var-
ious carriers.
Britton suggests without broker-
age, insurance companies would
have to sell life insurance policies
through some form of career agent
distribution or multi-tiered market-
ing organizations. He said these
groups currently sell fairly unat-
tractively priced products.
Another alternative would be
Personal Producing General Agents
(PPGA). Large numbers of them
would be needed. “In that case,
insurance companies would have
hundreds of points of contact with
agents rather than one contact with
a BGA,” Britton said. “Companies
would have to beef up their internal
marketing staffs significantly to fill
the marketing void left by the ab-
sent BGAs. Carriers would have to
work hard to recruit large numbers
of PPGAs to distribute their prod-
ucts. It would be difficult for a pro-
ducer to become a PPGA having suf-
ficient companies to provide choice.
This would mean fewer choices for
clients to fit their insurance needs.
Impaired risk insurance would be
much harder to place without the
shopping capability of the BGA.”
In this non-BGA world, producers
would have to rely on carriers to pro-
vide information on their products,
Horner pointed out. “This would be
a much more cumbersome process
than the brokerage system in which
they can get basically everything
they need with regard to products
and solutions from a single source:
a BGA,” she said. In her opinion,
there is not any other single source
capable of replacing what BGAs do.
While some broker/dealers, wires,
and banks provide similar services,
she said most are supported, at
least partly, by BGAs. “A producer/
customer would have to go to mul-
tiple sources, including the carriers,
to get what they need in the way of
product, solution, information, and
options,” she noted. “It would be a
very disjointed approach.”
Horner admits a private insur-
ance counselor or someone like
that could provide information and
policy options similar to what BGAs
provide. “However, the breakdown
would come once the solution is de-
termined -- how do they execute?”
she wondered. “What carriers would
be equipped and prepared to handle
this type of approach? Determining
the policy solution is only part of
the process. Execution is key once
the solution is identified. The BGA
offers a beginning to end process.”
Could technology fill in?
BGAs use technology now in serving
clients. Maybe technology could be
an answer if brokerage went away.
Without brokerage, “carriers would
have to rely more on direct solu-
tions utilizing technology and/or al-
ternate forms of distribution,” said
Horner. “The challenge with this is
being able to get their value prop-
osition, products, and solutions to
be shown in the best light consis-
tently. In addition, the many alter-
nate forms of distribution that exist
currently utilize brokerage in some
capacity.” This suggests technology
could not be a complete substitute.
“Technology provides three valu-
able assets for BGAs: front office
solutions to their distribution, back
office solutions including an agen-
cy management system and other
tools, and the connectivity to all
their training partners like carriers
and service providers,” explained
Ken Leibow, Head of Distribution
Technology and Strategy/Procure-
ment at Global Bankers Insurance
Group. Programs like these are not
accessible to the public.
“When dealing with 20 carriers,
100 different products, and thou-
sands of agents, it’s not possible
to provide fast and efficient service
without technology,” he said. “From
agency management systems to
e-applications, product brochures,
email campaigns, and leveraging ed-
ucational and other materials from
carrier websites, technology is a
crucial resource for BGAs.”
Leibow said some aspects of the
insurance sales process could be
done by using artificial intelligence.
This would require customers to an-
swer detailed questionnaires. Their
answers would be curated and com-
pared with different policies using
algorithms based on an aggregate
of similar cases to find appropriate
policies. He cautions a system like
this would lack the needed sophisti-
cation and human judgement to find
the best match between customer
and policy. “While technology can
be leveraged for predictive under-
writing, the underwriter has to make
a judgement call after getting the
scores back and then decide whether
to take on that risk,” he said.
Another problem with using an
online interview system is human
fatigue. Now, when producers do
telephone interviews with prospects
to ask about their medical condi-
tions, after 30 minutes there is a
huge drop off in responses, Leibow
said. “An online application form
would need to be simple and quick
“The brokerage environment offers producers
many products and services, allowing the producer to
provide unbiased solutions based on consumer needs,”
said Colleen Horner, VP, National Accounts, BGA
Distribution at Nationwide.
www.nailba.org 7