Benefits of Brokerage
In considering the role of brokerage,
“You need to remember that tradi-
tionally life insurance is not pur-
chased, it’s sold,” Britton stressed.
“People just don’t wake up in the
morning and say, ‘I’m going to go
buy myself some life insurance.’ So
no matter how we look at it there
still needs to be a force that encour-
ages the buyer to make the step and
understand they need life insurance.
This is what the professional life
insurance agent does, and he pro-
vides plans that fit clients’ needs.
Agents spend a significant amount
of time prospecting and that is what
they are paid to do. If you use mass
media like TV to do that job, then
you’re simply moving agent compen-
sation from an agent to the cost of
advertising. Eliminating the sales-
man does not reduce the cost of dis-
tribution.”
To Britton, the benefits of broker-
age are fourfold:
1. Variable low cost distribution.
2. Client and agent choice to pick
the best plan.
3. Reduced internal marketing by
carrier that is replaced by BGA.
4. Reduces point of contact and
agent support to one vs deal-
ing directly with hundreds.
Leibow emphasizes the benefits
of BGAs’ in-house underwriting ex-
pertise combined with their abil-
ity to shop among carriers to find
the best policy for each client. “If
a person were to go out and try
to buy insurance for a specific sit-
uation it would be very difficult
without BGAs,” he said. “Agents get
more carrier expertise by working
through BGAs and are able to find
better product solutions for clients’
situations. BGAs are most important
for the underinsured because these
people don’t know what they need
to buy and BGAs know which carriers
offer appropriate policies for specif-
ic situations and health conditions.”
“I do not believe there is a cur-
rent system that could accomplish
what the BGAs do for the industry,”
Britton noted. “No other system can
replace brokerage. If brokerage went
away, industry sales would take a hit
and product cost would go up to sup-
“If life insurance could only be purchased
online, it would leave more people underinsured or
uninsured,” said Ken Leibow, Head of Distribution
Technology and Strategy/Procurement at Global
Bankers Insurance Group.
port another distribution method.
Client access and choice would be
greatly reduced. Brokerage is agent
and client first. It is total variable
cost to the product providing com-
pany. It overall reduces the cost of
distribution and provides greater
value. Even with a financial counsel-
or, clients would be better equipped
under the support of a BGA.”
“Carriers rely on the brokerage
distribution to be an extension of
them in getting their products and
solutions to the end consumer,”
Horner said. “Without brokerage,
carriers would lose a significant
amount of exposure with producers
which ultimately limits their expo-
sure with the end consumer. While
carriers face heavy competition in a
brokerage environment, their access
to producers increases substantially
in a brokerage environment versus a
direct sale environment. This type of
competitive environment allows the
carrier to gain intelligence on their
competition, which, in turn, helps
them remain a viable alternative and
solution in the marketplace.”
Or a slightly
modified future role?
While it is likely that brokerage will
continue as a leading form of distri-
bution, it will need to evolve so it
operates somewhat differently than
it does today. “As things stand, ad-
visors can’t identify the most appro-
priate policies for their customers
without BGAs,” Lea said. “Transac-
tional term insurance has gotten a
lot cheaper over the years, but com-
mission rates are basically the same
as they were, so advisors now earn
less in providing term insurance to
their clients. New technology solves
this problem. The agent can spend
a few minutes online explaining the
options to their client, complete
an order, and the policy arrives by
email in a few days. BGAs need to
be involved in partnering with carri-
ers to solve this transactional term
insurance dilemma.”
Absent brokerage, “simple life
insurance like term insurance could
continue to be sold through direct
marketing, ads, and online solu-
tions,” Horner agreed. “Any transac-
tional type of product can certainly
be sold this way. However, the more
complex sale almost always requires
a producer, financial advisor, or ex-
pert. These more complex sales I
would assume would experience a
significant decline.
“Brokerage distribution provides
unbiased solutions that reach a vast
array of consumers,” Horner con-
tinued. “The carriers they represent
and the solutions they provide are
crucial in the sale of life insurance.
We have all seen the statistics show-
ing how underserved Americans are,
either by not having any life insur-
ance or being grossly underinsured.
Limiting the outlets of distribution
would damage competition and ulti-
mately limit the options for the end
consumer.”
The world has changed signifi-
cantly in the past 40 years. Broker-
age has not kept up. “We are going
to become Blockbuster Video if we
don’t change. What we want to be
is Netflix,” Lea stressed. “We have
this antiquated process so outsiders
are coming into the insurance busi-
ness trying to find a better way. Why
shouldn’t BGAs get in front of that
technology wave and be a part of
it? We still have to be involved, we
still have to provide the solutions
by working with the carriers, but we
don’t have to process every single
case that comes along. High end
cases will always require our high
touch concierge approach while we
redirect transactional cases to a
more automated process between
the manufacturers (carriers), dis-
tributors (BGAs), and retailers (ad-
visors).”
“We are going to become Blockbuster Video
if we don’t change. What we want to be is Netflix,”
stressed NAILBA Board member Jason Lea, CFP,
who is Chief Executive Officer of Brokers’ Service
Marketing Group.
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