IMO consolidation, new products, recruitment top distribution challenges

DALLAS – The merger-and-acquisition activity in the independent marketing organization corner of the insurance world is one trend that defies easy predictions.

"I think there will be a space for aggregators, and I think that will be a fine business model. And I think there will be a space for organic growers, and I think they'll kind of coexist," said Patrick Kelly, CEO and co-founder of Signal Advisors. "It's interesting to see how they all come together, and who will be the last one standing. That's going be an interesting thing to watch."

Kelly joined a panel Wednesday during the first day of sessions at the Annuity Distribution Summit, hosted by the National Association for Fixed Annuities. The panel promised "an inside look at the future of distribution" and covered a variety of threats and disruptions to the industry.

Karen Essary, chief operating officer of Ideal Producers Group, shared a recent meeting experience in which she was asked for advice on starting a new IMO.

"I was like, maybe not. I don't know," she said. "Or collaborate with somebody else, join forces with somebody else.

"We just never saw this before," Essary added."There's not a ton of players out there anymore. There's, like, a few really big ones."

Essary expressed confidence that any good IMO can still compete, "no matter what size you are." However, the insurance marketing business is now dominated by the big players.

IMOs like Integrity Marketing Group, Simplicity Group, and AmeriLife Group are swallowing up smaller agencies in an acquisition frenzy. The desire for "scale" is seen as a way to improve efficiencies in marketing, compliance, and other areas.

'It's still the same pool'

The distribution panel, moderated by Jason Krohnke, vice president and head of national accounts for American Equity, touched on several other issues impacting distribution.

Like producer recruitment, for one.

"I feel like for years, we've all been working with the same pool of agents and just kind of swapping, and the bigger the IMO, maybe they have more of the technology," Essary said. "Nothing wrong with that at all. And then somebody comes out with a new marketing program, but it's still the same pool of agents."

Instead of luring people with the latest shiny objects, the industry should focus on making connections, she explained. New Starbucks CEO Brian Niccol received a $10 million bonus and a private jet in order to commute from his California home to the coffee chain's headquarters more than 1,000 miles away in Seattle.

Essary recounted the recent news to contrast it with how Starbucks rose to success in the first place.

"They started out with this personal you come in, you can visit and hang out, get to know people. We're going to put your name on the coffee cup," Essary said. "And now it's a lot of mobile and I get that we have to do some of that as we grow, but it's still about connections."

New products are undoubtedly going to be needed to serve a growing retirement population. Annuity sales are setting records, but that won't always be the case, said Tony Compton, president of annuity marketing for Advisors Excel.

"I think most people agree that it's an amazing year to sell annuity business, but it's going to get tougher," he said.

Interest rates will drive business

Interest rate changes are going to drive a lot of product decisions in the near term, Essary said.

The Federal Reserve stunned economists last month by slashing its benchmark interest rate by a whopping half-point. Experts had expected a quarter-point cut. The move is expected to be only the first in a series of Fed rate cuts that will extend into 2025.

The Fed funds rates is actually a range, and that range had remained at 5.25% to 5.5% since July 2023, following a campaign of rate hikes to combat surging inflation. Prior to July 2023, interest rates had been at near zero for most of the previous 15 years. On Sept. 18, the rate was cut .5% to 4.75% to 5.00% by the Federal Open Market Committee.

"There's people that are still living in the 2015 or the 2021 interest rates, and they're looking for changes, and they're going to need something to help get them to the better rate than they were in," Essary said.

© Entire contents copyright 2024 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.