Today’s Life General Agency: What It Does Best

By Corey Weiner
InsuranceNewsNet

How viable is the general agency moving into uncharted territory in a world of "soft-marketing" and "information is king" mentality and transparency?

In short . . . sometimes.

Why do some endorse the GA system of life insurance distribution?

Autonomy for one. Efficiency another. Life insurance Darwinism exists in a vacuum in this space. By design, the General Agent acts as an independent extension of multiple coexisting insurers. Agile, aggressive, (and usually not a publicly traded entity) trading on intellectual capital and competence; persistence as well when one considers the nature of their day-to-day activities.

Many general agencies are run by former producers who still get a rush from winning new business just as much, if not more, than agents - their customers.

Property and casualty insurance is generally streamlined with television ads offering to compare "apples to apples" and save consumers money.

Marketing insurance this way works for one reason: consumers have to buy that insurance by law. Marketers have a captive consumer population. No buying decision is involved in this equation. Only company A versus B versus C, and so on.

Life insurance is not sold that way.

Enter the General Agency system; invisible intermediary in the life insurance and annuity arena.

A number of producers believe the GA hinders business and they are better off on their own; especially given the availability of technology and information resources of today. And that makes a valid point.

Others view them in a similar way to how consumers view divorce attorneys or oral surgeons.

They couldn't care less until they need one. And it makes them sick to cough up the points in compensation payout even though, intellectually, they know life insurance can be potentially complicated.

Key areas where GAs thrive today and are poised to continue so in future years:

Institutional Markets
These are big wire houses and portfolio management companies. Merrill Lynch, Morgan Stanley, UBS, and other wealth management firms go here.

Why? They have few revenue sources more profitable than life insurance. Their customers like to own life insurance – as long as it is sensible and placed with a trusted insurance company.

Life insurance demand is generally inelastic by the way; its demand is constant over time.

Comprehensive financial managers have a fiduciary responsibility to manage risk just as much as other areas of a portfolio.

Opportunity Snapshot
Growing. Even boutique investment managers are more and more comfortable integrating life insurance into financial strategies.

"What about when a top team at UBS gets involved with insurance?", rhetorically asks Bob DiMeo, director of Southern California for Crump Life Insurance with three decades of success as a top caliber GA.

"Or they leave a big firm and go out on their own. You have a broker-dealer to clear through, but who is going to provide all the big-ticket insurance plans and screen out the right programs like we do?

My team comes in and provides infrastructure and subject-matter expertise invaluable to business development efforts", DiMeo says in his notoriously calm, collected, and matter-of-fact manner. 

Corporate-Owned Life Insurance Markets
BusinessWeek, the WSJ, and Forbes always publish articles about organizations enlisting company-owned life insurance risk and cash management reasons.

Why? Organizations, especially charities are often not involved in COLI because of one unexpected reason: their leadership has a full plate and is unaware of the leverage life insurance brings to the table operationally.

Opportunity Snapshot
HUGE. Period. Call any New York Life agency's top producer. The corporate-owned life insurance is his or her bread and butter.

Veteran producer Lynn Borker in Houston at Northwestern Mutual: "COLI is some very cool stuff. I mean—hard line nuts-and-bolts tax and cash management planning.

Usually the company-owned policies are big transactions and done in teams for Fortune 500s and an owner and his accountant or CFO at smaller companies or charities.

Adds insurance design-savvy Ms. Borker: "Once I explain how the life insurance will work in layman's terms, the next question is always the same: 'Are you sure this is legal and IRS-approved? Really?'"

Yes. It is.

Experienced producers like Mr. DiMeo and Ms. Borker live for talking about this stuff as if it were the U.S. Open.

Independent Multi-line Agencies & Financial Planning Generalists
Why? These agencies have a vast amount of ground to cover. An overwhelming amount of products and strategies are enough to turn agents off.

Opportunity Snapshot
Sometimes producers want objectivity versus an in-house agent role at an insurer with its own products and bias.

Says Mr. DiMeo: "We have agencies and even other ones [general agencies] using us [Crump Life] as their upline because of technical expertise and marketplace leverage. Pure and simple.

A good general agent has to gauge what is legitimate, what is a threat, time waster, et cetera, before anyone else on the street. If you are running an agency, the last thing you want is losing a client because of a botched life insurance transaction.

My team is sensitive to this and sometimes spends more time telling agents when not to use life insurance; they respect us for that," reflects Mr. DiMeo quickly before having to cut out to grab a ringing sales desk line.

Life Settlements/Special-Focus Markets
These are not GAs in a conventional sense but rather niche players who likely market to GAs and insurance offices.

Why? Organizations like having assets earning compounding interest. They also prefer to protect themselves from civil law suits. Some want to liquidate unwanted, unneeded, or unaffordable policies.

Opportunity Snapshot
Life settlements are growing in popularity and catching mainstream attention because of their low-risk nature. Financed life insurance programs still have their strategic advantages despite volatile international credit markets.

Nobel Laureate Harry Markowitz: The logical investor's nature is to seek the maximum return for the least risk.

"Opulen Capital is not a GA. We work with a number of them providing settlement channels because of the complexities involved", observes Clark Hogan, director of the Los Angeles-based national life settlement brokerage firm.

Adds Mr. Hogan: "General agencies cover a lot of ground. It's remarkable. I send my sales force to seminars for continuing education with some GAs. They are definitely the eyes and ears on the metaphoric life insurance street."

It's easy to be untrusting and argue over compensation point spreads today. Marketplace competence is hard to come across for producers in the field as well.

Dennis Cataldo of DMC Executive Planning in New York perhaps sums up today's GA value proposition best: "Although we [general agents] don’t practice law, you must understand the Internal Revenue Code. You can provide tremendous added value when you have a thorough knowledge of insurance and tax law.

All agencies can run term quote spreadsheets and many work effectively with underwriters. Some are good at the point of sale. A winning GA adds creative case design with the best corporate planning techniques."

Published by AOL Money, Askmen Finance and industry journals, a majority of writer Corey Weiner's time is spent making sales and research-materials for financial services organizations. (805) 722-8340 or Doylerotunno.com.

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