Carriers and Castaways
Companies and agents must rescue each other for the good of the industry.
Sometimes it seems as though insurance agents have become the real-life embodiment of Chuck Noland, the FedEx employee portrayed by Tom Hanks in the movie Castaway. He survived a plane crash, only to be stranded on a desolate island for four years and forced to fend for himself.
After more than a century of flourishing symbiotic relationships between insurance companies and agents, the companies, either out of expedience, incompetency or arrogance, have left agents marooned and fending for themselves. There even seems to be an attitude of ambivalence toward the very survival of the agent distribution system.
Think about it: Companies no longer provide any type of financial support for the agent, especially for those new to the business. “Agent training has become an oxymoron. What companies define as “training” is limited to “saies seminars” where some home office person (who probably has never sold a policy) will plod ponderously through a PowerPoint presentation extolling all the detailed technical features of the latest product. It is like teaching someone to sell a television by explaining all the electronics, rather than the beauty and entertainment value of the picture it produces. Companies no longer make the investment or take the time to teach the agent the most important aspects of the job: finding the prospect, identifying a need, recommending the proper solution and motivating the prospect to act.
If that is not enough, when it comes to even a whiff of a consumer complaint or regulatory question, the agent is presumed guilty and must prove his or her innocence. It seems that rather than working with the agent to resolve the issue, the companies become a protagonist in the complaint against the agent. Once an application has been submitted and before the policy is issued, the underwriting process has become more akin to a minefield the agent has to circumnavigate to prove that they have not done anything wrong (Certainly, there have been abuses and inappropriate sales made by agents, but much of that blame can be laid at the clay feet of companies that failed to invest in proper training and supervision of the agent).
And it gets even worse. Companies seem to view the agent as superfluous to the sales process and are intent on abandoning the agent distribution system — especially independent agents — by striking distribution deals with banks, investment firms and broker-dealers. The objective for the companies seems to be to “rent” a distribution system, rather than growing, developing and controlling their own system. The assumption made by the companies is that this approach is less expensive and it shields the companies from accountability for the actions of those selling the products. In addition, more and more, companies are attempting to distribute products via the Internet that totally circumvents the agent.
There is another subtle phenomena being employed by the companies that is detrimental to the agent and ultimately the consumer. There was a time, not too long ago, when companies recognized that in order to grow they needed to earn the business, respect and loyalty of the independent agent distribution system. However as competition among companies and options for independent agents have diminished, a number of companies now unabashedly exhibit an arrogant attitude suggesting they are entitled to the business written by the independent agent.
If it is large enough and the competition is relatively anemic, the company can be tempted to implement an entitlement strategy by demanding — under threat of withholding product — to be the primary company of the agent. This approach might seem to be an effective use of corporate leverage against the distribution system and may bring short-term results. However, the hypocrisy inherent in this tactic is that a company that demands the support, respect and fidelity of the distribution system is the least likely to offer the same in return. In reality this is a self-destructive act of folly, because it plants the seeds of contempt and loss of respect for the company and that will ultimately work against its success.
The reality is that the life insurance industry is presented with its most significant opportunity for success — the need for a safe, secure income that cannot be outlived. The best products to take advantage of this opportunity are most effectively delivered face-to-face by a well trained agent to the consumer.
It’s quite simple: It the insurance industry and the independent agents want to have a successful future, they both have to invest in it — and in each other. Given that it is impractical for the industry to go back to the captive agent system, this investment should take the form of a partnership between the company and various marketing organizations in an effort to attract and retain new agents. By offering education, training, and appropriate supervision, the agent will not only have product knowledge, but knowledge of how to properly present and sell the product.
A company will ultimately succeed when it adopts a philosophy that it is not entitled to the loyalty and business of the agent, but must earn both. This means the insurance companies will have to assume more of the direct responsibility for training and supervising agents and pay more to marketing companies on the condition that these funds are used for true agent education and supervision.
To protect their own future, when dealing with castaway agents marketing companies will have to do more than recruit agents and let them fend for themselves. These actions should not be viewed as an increase in costs – for either the insurance company or the marking organization – but rather as a lifeline to the future that may be uncertain unless the investment is made to assure it.
By Robert W. MacDonald for October 2012 issue of InsuranceNewsNet Magazine. Robert is the retired chairman and CEO of Allianz Life of North America