The death of the life insurance specialist: What will it mean for the industry?

By Jeff Reed

Kestler Financial Group


The question seems so simple: How do you see life insurance and other related financial products being distributed in the future? The answers were anything but simple.

I recently attended an annual meeting with our carriers. With more than 250 people representing more than 60 agencies and in excess of 15 carriers and other industry experts in one place, there was more than enough information to keep me busy writing for weeks. While I will drill down into some of the specific topics in the coming weeks, there were two major topics discussed that impact all of us.

The first and perhaps most compelling was the panel discussion on the future of distribution. The question seems so simple: How do you see life insurance and other related financial products being distributed in the future? The answers were anything but simple.

The complication comes from all of the related topics: product design, which markets are we talking about, and how will it be underwritten are all part of the answer to this question. Before we get to those, we need to talk about the second topic: Who will be the next generation of life agents?

One of the statistics tossed around during the discussion was the 4 percent reduction in the field force over the last few years. The consensus was that this number was not indicative of reality. For most life agents, retirement is really not in the cards. They stay in the business forever. They generally love their clients and enjoy their work so much that they slow down a bit, take some more days off and maybe take on a junior partner. If we talked about fully employed agents who consider life insurance their primary business, I think there would be about four agents left in the entire country!

An obvious overstatement, but you get the point. The life specialist is a dying breed. We're being replaced by the various flavors of "financial advisors" who address any number of aspects of financial planning, asset management or risk management. This is where the growth in the agent base is coming from, and they approach insurance products differently. They are generally less comfortable with the underwriting process, as a result of their relative lack of experience. Frequently, that translates into a less-than-ideal underwriting result and a good deal of frustration for all involved.

When you combine this trend with the carriers' understandable desire to sell more product, a few things become clear:
  • A significant increase in the face amount that a client can purchase on a "jet issue" basis is coming. We're talking up to $1 million for the younger healthy client.

  • Direct-to-consumer distribution is also going to expand. Transactions that do not represent an opportunity for the agent to add value will no longer require one. The fee-based financial advisor may simply point their client in the right direction and get out of the way.

  • Less insurance will be sold
Why do I say this if it is going to be easier to transact? Simple. While technology has revolutionized other areas where the client is comfortable making buying decisions on their own (When was the last time you used a travel agent?), the overall amount of life insurance being sold continues to decline despite the fact that the "self-serve" approach via the Internet continues to represent a larger and larger segment of the market. Our product is sold, not bought. And while the Internet is great for research, most of the public still wants to deal with an actual person when purchasing.

So, if all of this is the proverbial train bearing down on us in the tunnel, then what should we be doing about it? I will cover that in my next article.