Rise of the uber-agency and uber-IMO: Good, bad or neither?

By Adam Stohlman

Stohlman Financial Services, LLC


While large, multistate general agencies have been around for decades, a newer phenomenon has swept over our industry in recent years -- one I refer to as the rise of the uber-agency or uber-IMO ("uber" being German for "super," but to the Nth degree, for those who may not know).

If you are new to the insurance and financial industry, you would not necessarily be aware of this phenomenon. But, for those of us who have been involved for some time, the explosion in growth of not only agencies but independent marketing organizations, or IMOs, and the amazing rate of their expansion in recent years has been remarkable and staggering. Furthermore, their impact on the industry has also been felt in nearly every market, niche and micro-niche of our business.

And what, exactly, is an uber-agency? It's, in short, a large, multistate, general agency, similar to what has existed in the insurance world for several decades running, but with a difference: These agencies contain a huge number of agents, sell a huge number of products and continue to expand at an almost incredible rate -- with no apparent limits in sight.

Uber-IMOs -- which also have been around for many years, but really began to take off with the changes in federal law that allowed banks to sell insurance and insurance companies to own banks -- also have similar characteristics: These IMOs employ a huge number of marketing reps and move huge blocks of products (and also seem to be expanding exponentially, with no limits in sight).

There is one more factor that distinguishes these "ubers" from their predecessors as well -- their burgeoning influence on insurers, institutions, agents, advisors and the public. This influence can be seen and felt in product design and development, product distribution, industry trends, company, agency and representative marketing, conduct and practices, and even consumer preferences, appetites and behaviors.

The sheer number, size, rate of growth and influence of these uber-organizations then requires us to ask, "Is this phenomenon a good thing or a bad thing for the insurance and financial industry? Or, is it neither?"

Many would argue, for instance, that the rise of the ubers is a great positive. Many would say that they have reinvigorated the insurance sector, particularly, and caused many sleepy, old-time insurance carriers to wake up and get moving. Their efficient and aggressive marketing, distribution and management methods have stimulated many stagnant, self-satisfied, slow-growing carriers to get with the times and update their products, distribution channels and marketing methods either to compete with the ubers, or to unite with them before it's too late. Indeed, some insurers who have failed to wake up and face this phenomenon previously are losing market share at such a rapid pace that their very viability may be at stake in the not-so-distant future. And the exact same thing could be said of many staid financial and investment companies.

At the same time, as far as agents and advisors are concerned, the ubers have both inspired and allowed them to once again become lean, mean sales machines. Due to the effect of the ubers on the carriers and financial institutions, insurance agents and investment representatives now have many more choices available in their product mixes, many more innovations and add-on products to market and many more opportunities to make sales -- both big and small. And, as with the insurers and financial companies, many agents and advisors who have thus far failed to take advantage of the options and alliances that the ubers and/or the suddenly more competitive carriers and institutions can offer them are now finding they have come too late to the dance and have been surpassed by the agent or advisor down the street.

As for consumers, who are largely ignorant of all of this, many have no idea of the vast range of products now available to them in nearly every corner of the insurance and financial industry. As a result of the ubers' powerful influence, stimulation of competition and growing rule in the marketplace, there are now more product offerings, innovations, add-ons and supplements available to the public than ever before. Furthermore, many of these products are more accessible to consumers and at lower cost than ever before, due to the myriad distribution channels, the high volume of sales generated via the ubers and their partners, and the competition created amongst the carriers and financial firms that are trying to keep up with them. This is positive, because it makes it much easier for the consumer to purchase a specific product meant to meet a specific need as said need arises, and without all the perceived `hassle' of sitting down with an advisor to work through a full-fledged financial analysis.

On the other side of the question, however, many would argue that the rise of the ubers is a great negative. In regard to insurance and investment companies, since many now proffer themselves wholeheartedly to the ubers' mega-marketing machines in seeking to maintain and increase their market share, product distribution and sales, the optimal full FNA insurance and financial sales model is now threatened on every front, as highly specialized products developed to meet every individual need proliferate daily. Advisors can now sell just the product needed to fit the client's immediate need and work on selling other needs later, without regard to their client's full financial picture. Depending upon the product, this may or may not be crucial, but it's certainly changing the way insurers and financial companies market and sell their insurance policies and investment vehicles. Also, this trend may be undercutting opportunities for larger or multiple sales per sales call -- and it's driving up product and producer development costs.

For advisors themselves, the rise of the ubers can be a bane rather than a blessing, just trying to keep abreast of all the new products coming out and what each product covers or provides. Worse than that, an advisor may leave coverage gaps on the insurance side if he does not properly dovetail all the various products at his disposal to fully protect the prospect. Furthermore, if an advisor fails to distinguish cases in which a full needs analysis is warranted versus a one-appointment, one-product sale, he or she may sell at least one product more often, but the advisor also may be leaving clients vulnerable to financial loss in some form by not conducting a full analysis of their total needs. If a key duty of an advisor is to make prospects aware of their exposures or opportunities for gain and the advisor fails to do so, he or she is disserving their prospects -- not to mention leaving themselves open to claim or suit for liability due to negligence in covering a vital need or in not confirming suitability of a particular product or investment. And, lest we forget, due to the environment created by the uber-organizations, advisors are tempted more and more often to take the money and run on a quick one or two product sale, rather than conduct a full FNA, and thus may leave an unknown number of dollars on the table every time.

As for the public, consumers now face a more dizzying array of choices than ever before, brought to them in a multiplicity of forms and ubiquitous advertisements. This can cause the public great confusion and discouragement at best if they are not aided by a competent advisor and leave them vulnerable to loss or lost opportunity at worst.

Furthermore, consumers do not realize that the product choices they have are increasingly designed in response to the demands of the uber-agencies and uber-IMOs that market carriers' and institutions' products and not necessarily to the needs of consumers themselves. Insurers and financial companies now bow to what the ubers seek in order to maintain their relationships, market standing, distribution and sales. This means that what is actually available to the public has been dictated by the ubers to a degree. Accordingly, what consumers buy, why they buy it, and certainly how and when they buy it, are all being influenced by the uber-agencies and uber-IMOs.

So, what is your conclusion? Is the rise of the ubers good or bad? Or neither? I, for one, have not completely decided. Have you? Please leave your comments below.

Copyright 2008 by Adam Stohlman. All rights reserved.

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