“It’s getting more and more difficult to do business with you!” Life insurance companies keep announcing that they want to be the ones that are easy to do business with. But brokers are still waiting for them to come up to the point of satisfactory service!
In short, insurers’ fight for market share, diversified distribution, and consolidation, are all leading to declining service and an alienation of brokers.
More and more brokers have been talking about the increasing challenges they face in dealing with insurance companies. To find out more, The Insurance Journal held a broker roundtable this summer on “The Challenges of Dealing With Insurance Companies,” and to possibly get potential solutions to these issues.
As the purpose of the roundtable was to discuss industry issues in general, the names of insurance companies were intentionally omitted. It is interesting to note, however, that the issues identified by the brokers were essentially common to them all. The brokers who attended the roundtable came from varied backgrounds in the insurance business.
Solutions may not be easy to come by, but if these brokers had a chance to sit in a locked room with CEOs of life insurance companies, they would ask for mainly two things: to reinvent their relations with brokers in a way it becomes really easy to deal with them, and to repackage compensation. At the thought of being locked in a room with CEOs, producers were quick to make requests!
“More money!” joked Stephen Smith, adding: “I would ask for things that are realistic, like the standardization of applications.”
“I would like it to be an electronic application,” added Diane Carruthers. She also wants easier access to client information on investment and policy status. “Only one or two companies are even up to par,” she stated. “There’s nothing that drives me crazier than having to call in and get data on a particular client. I want it this minute, now, not a week behind.”
David Engel’s recommendation to the CEOs is one he said might be too futuristic. He said he would like to see the insurers feed information into one source, like a LifeServe with servicing. He also agreed with a standard application, and added that he would also like to see standard applications for all reports: death, change of address, etc. “And I want access to my clients’ information for all companies.”
“Open the door on pricing,” suggested Jim Britton. “Open the door and expose the pricing of insurance and the design of product. The problem I have is that they will design a feature in an insurance product that’s going to implode and cause a landslide of lawsuits down the road. … And we’re the one who are going to get sued! … I want full disclosure because they’ve downloaded all this responsibility to me and they haven’t disclosed how they’re doing it.”
“Why not expose how everybody gets paid and standardize that,” asked Aïda Fokas. “That might be scary,” interjected Mr. Britton. But Mr. Smith agreed with Ms. Fokas. “At least standardize the bonuses,” he said.
Mr. Smith goes further. Bonuses are at the root of many of the major problems the industry is facing: lack of loyalty between brokers and companies, policy replacement, sales contests, client services, etc.
“The companies do not have an acceptable policy turnaround time,” added Ms. Fokas.
Ms. Carruthers said she would even choose the company based on ease and service on comparable products.
Ms. Fokas and Frank Mastrocola agreed. “Insurance companies exist because brokers sell their products,” stated Ms. Carruthers. “And they seem to forget that,” added Mr. Mastrocola.
“That’s the bottom line,” continued Ms. Carruthers. “Because if they make it to difficult, the broker is just not going to sell. If I had two products that are the same, take a term-10 for example, …. and I have one company that’s going to make it easier to do business with and I have another one that’s going to drive me wild, guess which one I’m going to do business with. That’s what it comes down to. If you can get the same quality product for less the aggravation for you, which one are you going to deal with?”
The brokers also identified some of the underlying issues that are causing problems for brokers in the industry. One of them is distribution.
“What I’ve been watching in the last couple of years,” said Mr. Britton, “is the incredible amount of distribution problems. Everybody wants to be in a different distribution channel – they want to be in all the distribution channels – they want to assess which one is going to give the best return on investment. … And I really don’t think they have a clear idea of which one is the right one.
“What bothers me,” added Mr. Engel, “is some of the companies will do some things and provide some services for one distribution system, but they wont provide it for another distribution system. It drives me up the wall. They want business from all channels, because they want to be manufacturers of product, but they will not provide the same services to all channels. The insurers are just becoming wholesalers. [So we] do business with the companies who make it easy to do business with.”
“You see what’s evolving,” continued Mr. Engel. “They just want to be a manufacturer of the product. They don’t want to be involved in distribution. However, I personally feel they have given up their right to make sure that the business is being placed right. And they’ve given up their right to make sure that the business is being serviced. And if we think we’ve seen lawsuits with this premium offsets stuff, ‘you ain’t seen nothing yet!’ We’re going to see lawsuits, and some of these companies are going to get it right in the neck because of some of the practices that are going on.”
Doing business with the insurers was easier, more rewarding, and relationships existed, said the brokers. So what went wrong? “Acquisitions!” they said.
“When they make an acquisition, they are out of the people business for probably a year. And they don’t come around to help you build your business, they don’t come around to help you,” said Mr. Britton.
The problem of consolidation was also identified as a reason why there is such a lack of standardization in the life insurance industry.
“There is going to be consolidation,” stated Mr. Britton. “And maybe they can come to the table [to talk about standardization] after that. Why would company X pay money on a system when they could be the system? I don’t think they would put five cents into the system. So I don’t think they will come to the table until they begin consolidating.”
“They are all deciding who is going to survive at this point,” continued Mr. Britton. “Some that think they are going to survive are not going to. I’m a consolidator and I get up in the morning wondering who made an acquisition … it could be that somebody bought us. It doesn’t matter. Prior [to the consolidation] I don’t think all the embarrassment in the world will get them to the table.”
Another example: “LifeServe is sitting there and collecting dust,” stated Mr. Britton. “It would make my life so much easier. There isn’t a company out there with a small enough ego to call up and say, ‘we want to be the first.’ I don’t think they can get together at the same table. Why? It’s the pride of trying to be one of the survivors.”
“And the best,” added Ms. Focas. “I think everyone is trying to get a big piece of the pie. And who ever can gather up more companies and have the most lucrative business – that’s the name of the game. It’s a greed game.”
Fighting for market share is a big concern for brokers. Because of consolidation, “the companies are forgetting who their clients are,” said Mr. Engel. “In Canada, there are only nine companies that control 80% of the market. And of those nine, three of them will disappear within three years,” he said.
Behind fund companies
The insurers’ service is increasingly compared to that of the investment industry’s as more brokers are licensed for both insurance and funds. The investment side seems to be miles ahead.
“I find it very frustrating on a lot of levels because I keep comparing how mutual fund companies react to me as a client, and I feel I’m also a client of insurance companies, and I don’t get the same respect as from mutual fund companies,” stated Ms. Focas.
Mr. Engel agreed. “Unfortunately, the companies are way behind the investment industry in how they look after their representatives,” he explained. “They are way behind technology-wise. I mean, it’s a total nightmare dealing with them. With the mergers – take one of the large ones – Company X is running on 42 different computer systems [because of the acquisitions], approximately, roughly, that’s what I heard. … So, they don’t know what they want to be. They say they want to be in our face, and provide us with the service to look after our clients, but they are not, and it’s very difficult to get the proper info from them, and it is not easy doing business with them.”
Ms. Focas pointed out that there is also a problem stemming from a high employee turn around. “I don’t want to be buddies with them, but I do want to have my service,” she said. “I don’t care who I talk to… With [the fund companies] I talk to different service people, but there is uniformity in service.” Mr. Engel added, “Listen, after three years, nobody knows me there any more.”
“We find that there are some [companies] that are better, but all in all… there is no standardization,” continued Mr. Engel. “Even in the way they do business,” added Mr. Smith.
Mr. Engel explains: “The mentality of the investment business is different than the mentality of the insurance business. The mentality of the investment business is that they have always gone through investment advisors that are different; they have a quick reaction. I deal with stockbrokers. When I tell them that I work on a case for 6, 7, 8 months before closing, it drives them [investment dealers] nuts. It has to be quick and everything has to be quick. It’s the industry – it’s a quick industry. The insurance industry is a slow industry.”
“The other thing too is that mutual fund companies all started with zero assets basically,” added Mr. Britton, “so they were all these tiny babies that got together in a room and they had not developed that 100-year ego.”
Mr. Smith summarized the lack of service by stating: “[The ease of doing business] changes with the amount of volume each company does. The ones that are getting a lot of business are impossible to deal with. And the ones that are sitting around, waiting for business to come in, you get excellent service. It doesn’t make sense to me. The number one company gives the worst service.” The other brokers agreed!