Recently, a controversial article appeared in a New York newspaper regarding the sale of single-disease insurance, which covers frightening illnesses such as cancer. One of the nation's major providers of such insurance products is AFLAC, which is based in Columbus, Georgia.
The furor came from consumer protection groups who allege that insurers market these products through "scare tactics" and that the coverage is of little value to consumers. AFLAC immediately countered that it does not use scare tactics, that the fear of such dreaded diseases is always with us and that the value of cancer-only insurance is obvious to anyone who has ever known someone with cancer. And AFLAC points out that it is not a one-product company. AFLAC might also argue that just reading its latest earnings reports will give a clear indication of the popularity of all its supplemental insurance products and that the organization employs a sizable chunk of the independent agency system to explain its products in detail.
AFLAC was not always a boon to the independent agency system. Back in the 1980s, the lion's share of AFLAC's agency forces were "captive" producers. Today, the total number of licensed sales people for AFLAC is 35,000. And all are independent contractors, according to Kathleen V. Spencer, senior vice president, director of corporate communications and deputy counsel. Spencer adds that independent producers are the "lifeblood" of its operations.
"AFLAC specializes in supplemen-tal coverage that is designed to fill the gaps left by basic plans," says Spencer. "Cancer is an enormous financial drain, requiring lengthy treatments with debilitating side effects," she said. "Our supplemental product--and I emphasize that it is supplemental--is certainly of value."
Dan Amos, president of AFLAC, says that the value of AFLAC's products is evidenced by the company's growth. "Our first quarter was marked by very strong sales growth in both Japan and the United States," he says. "We also experienced solid top-line growth in both markets. Most important, we met the goal we had established for 2000, which was to increase earnings per share by 15% to 17%, excluding foreign currency transactions."
--Kathleen V. Spencer, AFLAC Senior Vice President,
Director of Corporate Communications and Deputy Counsel
Amos says that AFLAC's strong sales growth is the result of two things: one, an expanding product line and, two, an increasing distribution network. "An integral part of the strategy that we have pursued for several years now is expanding our product line. In a recent survey in the Japanese newspaper Nihon Keizai, we were rated as the top company in terms of product development. In addition to our broadened product line, our strategy also includes increasing our distribution network. We continued to aggressively recruit during the first quarter of this year. We recruited 340 individual agencies and 115 corporate agencies."
Amos says that, in the United States, AFLAC had a very strong first quarter with sales up more than 20%. He says that accident/disability continued to drive AFLAC's sales, with about 56% of total sales during the quarter. "Our cancer insurance product sold well," he says. "It accounted for 23% of sales. And our payroll life products increased by 55% over a year ago. We sold $8.5 million in payroll life, which amounted to 6% of sales. We expect life sales to continue to grow, with sales reaching about $40 million for the year."
According to Amos, AFLAC continues to look for new product opportunities. It now offers a specified event policy that provides benefits for such illnesses as heart attack, stroke, coronary bypass and renal failure. "Although we introduced it primarily as a defensive product, it has sold quite well. During the first quarter, it represented 3% of sales. We are also in the process of introducing a new dental plan, which is a product that our agents requested and about which they are very excited," Amos says.
Continues Amos: "We are especially proud of the growth we have experienced on the distribution side. In March, for instance, the number of producers was close to 11,000, a record for an individual month. The average for the number of producers in the first quarter was 9,990, or 16.7% greater than the first quarter of 1999. That's the fastest rate of growth we've had in many years for the number of producers. Given the tight labor market, I think that is a tremendous accomplishment and speaks volumes about our business."
Amos also echoes Spencer's comments regarding AFLAC's sales force being the lifeblood of its success. "In the insurance business, we believe salespeople tend to gravitate toward AFLAC because of our record of sales success, the support that we give to our sales force and the brand we've built through our advertising campaign," he says.
Moreover, to those who argue that AFLAC uses scare tactics in its sale of cancer insurance, it might come as a point of interest that AFLAC is very serious about its concern for cancer patients. AFLAC helped make the AFLAC Cancer Center at Children's Healthcare of Atlanta one of the largest pediatric cancer centers in the United States, when it made a multimillion-dollar commitment to finance the renovation and expansion of the hospital's pediatric oncology unit. To date, the company and its sales force have contributed more than $5 million to the facility. At the AFLAC Cancer Center, young patients are treated for cancer as well as hematological diseases, such as hemophilia and sickle cell diseases.
Last May, as part of AFLAC Cancer Center Night at Turner Field, children being treated for cancer enjoyed a night at the ballpark with the Atlanta Braves. More than 120 patients, family members and medical staff from the AFLAC Cancer Center at Children's Healthcare attended a pre-game party and the Atlanta Braves baseball game courtesy of AFLAC.
"Positive attitudes are important to our young patients and to their families," says Dr. Stephen Lauer, medical director of the AFLAC Cancer Center. *
AFLAC, Inc.
Jim Poole
Media Relations
Phone: (706) 596-3264
Web site: www.aflac.com