Speaking at the 2003 Insurance and Financial Services Convention in Montreal this November, three stalwarts of the life insurance industry, Manulife Financial, Great-West Life, and Desjardins Financial Security (DFS), all said that better service is on the way.
The impetus for better service: consolidation! All agreed that with fewer companies to choose from, competition for distributors will focus more on service than on compensation or product design.
“There’s no point in acquiring if it does not improve your company,” said Paul Rooney, senior vice-president for individual insurance at Manulife. Consolidation should lead to lower prices, better service, and higher commissions, he stated.
But service is key. Products can be copied, said Mr. Rooney, and compensation met. “So the focus must be on service.”
Maritime Life, continued Mr. Rooney, is better in customer service for the advisor and consumer. “We must integrate that love of service,” he said. “Right now I would give Manulife a ‘C-‘ when it comes to service.”
The hope at Manulife is that this will attract and retain managing general agents (MGAs), which have been an increasingly important distribution channel for the company. In fact, distribution through MGAs has grown from seven per cent in 2000 to 28% today, according to Mr. Rooney.
Denis Devos, executive vice-president for individual insurance and investment products at Great-West Life, London Life, and Canada Life, emphasised the need to develop and maintain the MGA distribution channel. “We learned what is important to you and what Canada Life was doing right. We are confident about the future,” he said.
Echoing the comments of Mr. Rooney, Mr. Devos added that integrating companies is easy to say, but hard to do. “Anyone can be competitive for a short period of time, but it’s hard to be sustainable. You need to be big to be sustainable.”
Looking forward, Mr. Devos said prices on products will continue to stay low, technology will be updated, and insurance companies will build stronger relationships with fewer distributors.
“We will focus on the MGA channel,” he said, and listed compensation, back-office and product support, and improved service, systems and processes. “Consolidation should improve the services available,” he reiterated.
Mr. Devos warned, however, that despite the opportunities in Canada, this is a changing industry, and “only the strong MGA will survive.” MGAs will have to be more accountable and compliance will become a bigger issue for them as they will be more responsible for their brokers.
“Take advantage of consolidation or be a victim of it,” he stated. Run your company as a business. Manage your margins. Those themes that dominated his presentation.
Most important, add value to your services, he said. Have effective product support, efficient administrative processes, web-based and easily accessible information, management facilitation, and compliance management.
Mr. Devos was clear. Canada Life, Great West, and London Life will work with the brokers who can make their services more efficient. Build a business, he warned, not just a commission flow.
Efficiency will be the order of the day in 2004. Brokers will not be allowed to just provide the lowest priced products and leave it at that. Full financial security planning will be needed, as well as having a firm understanding of your clients’ needs.
“The insurance companies are competing for you, the advisors,” said François Joly, president and CEO at DFS.
“The company has to deserve your business,” he exclaimed.
Speaking for DSF, Mr. Joly said insurers are working hard to get your business and to keep it. He said the future will belong to insurers who meet the needs of advisors. For DSF, that will mean having solid finances, competitive products, a known brand, sales support, product related education, and technical support.
Mr. Joly predicted that mergers between big players were pretty much over but that fusions between smaller players would soon hit the books. He noted that the top five insurers have 74% of the market, and the top three have a whopping 64%. That leaves little room to play for smaller insurers, and they will need to differentiate themselves through the services they provide to their distribution forces. Ironically, the RBC purchase of Unum Provident happened just days later.