Marketing for Actuaries (LIMRA) - Chapter V - NONTRADITIONAL AND EMERGING DISTRIBUTION SYSTEMS

Overview

"nontraditional" for life ins is mainstream in France adn Spain
- half of US annuity mkt
high cost of fact-to-face selling by trad ins agents forced most co's to upscale mkt
middle mkt co's either abandoned mkt or chosen diff dist channel
nontrad dist channels by mkt
Middle Mkt
- worksite
- banks
- direct mktg
- internet mktg
Upscale Mkt
- fin planners
- mutual fund salespeople
- stockbrokers
- accountants (CPAs)

Nontraditional Dist Channels in the Upscale Markets

many reps used to be full-time agents in traditional system
Financial Planners
- negative perception of life ins agent - many got ChFC or CFA and advertise as fin planners/advisors/consultants
- objective: to become trusted advisor providing full range of fin advice
- growing number compensated on fee basis (vs commission)
  - fees: unpront to develop a written plan or asset-based
- some states allow both fees & comm, some states say either/or
- few ins cos make fee-based fin planning a primary strategy
  - potential liabilities, admin costs, potential conflict between independent advice and sale of proprietary products
Stockbrokers adn Mutual Fund Salespeople
- VAs a natural extension b/c of tax advantages vs stocks/bonds/mutual funds/etc
- stockbrokers most significant source of VA sales
  - not as sucesful selling life ins
- grid-based compensation systems - consistent w/ evolving needs of distributors & producers
  - grid approach - gross dealer concession - gross dist margin
Accountants (CPAs)
- enjoy high degree of respect and integrity in eyes of ins buying public
- clients good opportunities for 2nd-to-die life, annuities, and mutual funds
- traditionally good source of referrals
  - if not selling themselves, expecting agents to split comm w/ them
- very influential in fin affairs of high net worth clients

Nontraditional Dist Channels in the Middle Mkt

Worksite Marketing
- aka voluntary benfits
- mktg personal ins products to EE at their place of work
- products endorsed by employer that EE decides whether to purchase
- ER cooperation needed to initiate sales process and implemet payroll ded plan for EE prem payment
- insurers view as way to reach underserved potential clients in a cost-effective manner
- agents view as either primary or secondary mktg focus. For both
  - provides daytime selling opportunities
  - large prospecting list
  - fresh "door opener" conversations w/ decision makers
- EE view
  - discounted rates
  - convenient, non-intrusive slaes process
  - policy portability
- usually low min prems and guar iss/simplified u/w
- 3 ways to present and enroll
  - agent (or salaried enroller) meets w/ EE 1-on-1 at work
  - group settings
  - payroll stuffers/direct mail
- account admin is most critical factor to determining effectivness and success of program
  - depends on ability of payroll deduction
  - systems must be able to accomodate w/o add'l ER expense
- pricing requires special knowledge and u/w assumptions that allow for attractive profit margins
  - requires close monitoring of actual experience
Banks
- increasingly important for annuities
- 3 main strategies for bank annuities
  - licensed platform staff - specially trained bank employees
  - in-branch (bank) agents - usually work for Bank's ins agency subsidiary
  - third-party agents
- some mkt annuities through b/d or securities units
- some use direct mktg methods
- life ins sales not as sucessful as annuities < 1% total life sales
- reason for poor life sales
  - regulatory constraints (eased by passage of GLB)
  - u/w process an annoyance banks not used to dealing with (collecting blood, etc)
  - planning for a negative life event vs savings for home or college
  - banks used to transaction sales adn life ins not a transaction sale
- Compensation
  - most bank producers paid base salary w/ some form of incentive
  - banks hesitant to have sales force paid solely on incentive basis b/c of fear of agressive sales tactics
  - since prospecting not an issue, don't need to compensate for that
  - banks usually compensated by LIC via commission
  - other methods
    - expense reimb & allowance
    - override
    - lease paymenets for use of bank office space
  - incentive for non-licensed bank personnel for lead generation
- Bancassurance in Europe
  - very succesful in Spain (50%) and France (60%)
Direct Mktg (aka Direct Response)
- uses one or more media to elicit an immediate and measurable response
- records, tracks and analyses that action
- stores info about action in database for future retrieval and use
- methods
  - direct mail - tech allows to be highly targeted adn personalized
  - print media
  - broadcast media - select shows/times to hit target mkts
  - telemktg - outbound and inbound (primarily to support other direct response media by processing responses)
  - fax mktg
  - retail centers and kiosks
  - internet dist methods - own site or aggregators
- traditionally used for consumers not served by personal selling dist systems
  - need only limited or supplemental ins
  - live in geog remote areas
  - need products not widely avail from most co's, agents, brokers
  - need products whose comm potential is too small in relation to an agent's personal selling efforts
- Tarket mkts also includes indiv who can be easily reached b/c belong to special into or consumer groups
  - company's own customers
  - consumers who have prev inquired about a co's products
  - consumers who have prev inq about another co's direct mktg offer
  - members/vets of armed forces
  - hold dept store or bank credit cards
- Credit Card holders and SR Citizens frequently targeted

Copyright © 2004 Steve Welander.
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