NAILBA Perspectives Perspectives Summer 2018 - Page 9

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. www.nailba.org 9