Addressing the New Insurance Reality

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Tom Bates, Regional Vice President – Business, Owner and Executive Solutions

In my last blog entry, I mentioned the opportunity we see evolving to utilize our Business, Owner and Executive Solutions (BOES) capabilities to market life insurance through Property and Casualty agencies.

Many on the life insurance side see this as a critical outlet. It directly addresses the evolving business life insurance environment for the Principal Financial Group® and our customers: brokerage general agencies (BGAs) and our Career Distribution Field force.

In this blog entry, I will focus on environmental changes we’re experiencing in the insurance industry, while part two will focus on the sales process.

The environment for insurance sales is changing at a significant pace. A few years ago, estate planning was the dominant market. Life agencies built significant expertise in designing solutions built around providing death benefit protection to high net worth individuals. With recent tax changes, that market has changed significantly:

  • Experienced agents, many with an average age around 60, are choosing to retire.
  • Smaller target premium policies are being written.
  • More policies are being written.
  • More cases are about accumulation and/or business insurance uses – an area in which many agents may lack expertise.

So what does this mean for The Principal®? It means we are extraordinarily well positioned to take advantage of these market dynamics.

We have a value proposition to provide support that is fundamentally different from other carriers. That support, which has always been important, is now mission critical for many of our customers (BGA and Career producers) who need two things:

  • To reposition their value proposition to be attractive in the new space.
  • To gain access to alternative/additional customer sources – which might include many third parties (banks, wirehouses, benefit firms, etc.).

Probably no group has the potential for more growth than Property and Casualty firms. To help gain access to this new market, it would be beneficial to have access to our BOES platform and expertise.

What makes the Property and Casualty (P+C) market so attractive? The following are key factors:

  • P+C agencies need new revenue sources. They have seen their revenue drop from decreased product commissions, aggressive consumer shopping, and the impact of Obamacare on their health insurance business.
  • They have access to customers.
  • Cross-Selling is proven to enhance P+C customer retention.

Historically, life insurance sales successes in P+C agencies have been mixed. Generally they have taken the form more of an opportunistic occasional sale as opposed to the development of a systematic model. Agencies, however, who have decided to get into insurance as a business line and utilize the tools and resources available from The Principal have seen great success.

The tools available on our BOES platform provide value adds for P+C agencies. These tools include our Buy-Sell Review, Informal Business Valuation and key person calculator. In addition, our Accelerated Underwriting process makes one of the least appealing aspects of life insurance much more appealing to a P+C agent.

We have found simply using P+C language to be a fundamental part of our success. By addressing business owner concerns, we are addressing a major risk area – and P+C agencies are all about mitigating risk:

  • What happens to your client if they do not have a buy-sell agreement or if it is not current? This can have catastrophic implications for a business, and its departing and remaining owners.
  • What if the buy-sell agreement is not appropriately funded with life and disability insurance? We know one outcome from the recession is that many businesses dropped coverage to save money. In fact, only 42% of small and medium-sized businesses have business protection (key person life insurance) coverage in place.

In our next blog entry I will highlight an approach we are developing with our sales partners to build a sustainable flow of life insurance business from Property and Casualty firms.

*Source: Business Owner Market Study, “How Priorities Align with Practices,” November 2012, Harris Interactive and the Principal Financial Group®.