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Marketing Adding financial products to the agency menu More agencies grow their business by expanding services By Phil Zinkewicz As recently as 10 years ago, property and casualty insurance agencies that were described as “multiline” usually boasted that their product offerings ran the gamut of property and casualty coverages—personal lines and commercial lines P-C and a little life and health insurance. Then came the Gramm-Leach-Bliley Act, eliminating the legislative barriers that existed between insurance, banking and securities, thereby creating more competition for P-C insurance agencies. That law, plus insurance company marketing via the Internet, forced some independent agencies to consider expanding their horizons in order to stave off competitive pressures. Some of those chose to expand beyond life and health insurance into other areas of financial services. According to a survey by the Independent Insurance Agents & Brokers of America (IIABA), one in eight of its agency members offers estate planning and roughly one in 10 offers pension 401(k) services, risk management consulting, fee-based consulting and in-house premium financing. Seven out of 10 agencies don’t offer any of the services asked about. The IIABA survey points out that bank-owned agencies are more likely than the population as a whole to offer estate planning services (13%) and most other services. These agencies also tend to be larger, which may also explain their ability to offer a wider variety of services. Pat Borowski, senior vice president of the National Association of Professional Insurance Agents (PIA) says that the trend towards its members branching out into financial services is continuing. She says that a few years ago only about 12% of PIA members were involved in selling life and health insurance. Today, that percentage is well over 40. “Property and casualty agents made a try at getting into selling life and health insurance back in the 1980s because there was pressure from P-C insurers that were eager to get into the business,” says Borowski. “The problem there was that many insurers just didn’t have the quality products for the agents to sell. P-C agents took another stab at it in the 1990s by hooking up with life and health agencies, but it was a kind of culture shock and it often didn’t pan out. Today, P-C agents are going directly to the companies to assist in the design of new products. Some of our members are starting out in group life and health, then moving into individual life and health. As for other financial products such as estate planning and pensions, it depends very much on the agency and how far down the line it wants to go.” As the demand for financial products and financial planning increases, many insurance agents are choosing to gain the proper licensing and certification to sell securities and other financial products. Doing so, however, requires substantial study and passing an additional examination—either the Series 6 or Series 7 licensing exams, both of which are administered by the National Association of Securities Dealers (NASD). The Series 6 exam is for individuals who wish to sell only mutual funds and variable annuities, whereas the Series 7 exam is the main NASD series license that qualifies agents as general securities sales representatives. In addition, to further demonstrate competency in the area of financial planning, many agents find it worthwhile to earn the designation “Certified Financial Planner” or “Chartered Financial Consultant.” We asked a few agents who sell financial products outside the P-C market for their views on financial services opportunities and their strate-gies for capitalizing on this market. Chan Coddington, semi-retired from Bollinger, Inc., based in Short Hills, New Jersey, was in the forefront of encouraging independent agents to become more involved in life and health insurance products. “Ten years ago, the term ‘financial planning’ was not in common use in the insurance business,” he says. “Today, many successful property and casualty insurance agencies are involved not only in the sale of life insurance, but in annuities, estate planning, long term care and other types of financial products. Remember, the baby boomers are into their 50s and professional insurance agencies have to find ways to satisfy the needs of the older folks. I know this one P-C agent who had a client who was 83 years old and her assets consisted of a house worth about a half-million dollars plus about $150,000 in savings. He arranged for her to give her house to charity for which she received a huge tax deduction. She was able to remain in the house for the rest of her life. The agent also was inventive in the way he handled her IRAs. That’s the kind of creativity that P-C agents need if they are to become more involved in financial planning.” Coddington says that agents should consider selling long term care coverage, although he admits it is a “tough sell.” Says Coddington: “Individual long term care products are expensive, and people mistakenly believe that they are fully covered by Medicare, but that’s not true. Medicare covers the first 20 days of long term care and that’s it. Agents have to learn abut financial products and communicate to their clients, with whom they have already formed a relationship within their P-C business. In times past, if you mentioned life insurance or health insurance to a P-C agent, they would say ‘Leave me alone.’ That’s not true today. Agents are becoming more aggressive about learning about these new products.” Tony Craft, CEO of the Palomar Insurance Corporation, based in Montgomery, Alabama, says that at his agency, financial services is a separate department, albeit a small one. “We sell predominately life insurance, but also several 401(k)s, and we do some estate planning and long term care,” he says. “On the benefits side, we do a lot better in group health insurance. We also sell long term disability and group life. In addition, we also offer a product called Cosmetassure, which some might not consider a financial service, but it is a kind of contingent health insurance product. It is a coverage for people who go to plastic surgeons for cosmetic surgery. If there are complications and the patient has to go to the hospital for a stay, the coverage kicks in. In most cases, a person’s own health insurance policy won’t pay for this contingency.” Kibble & Prentice in Seattle, Washington, and M3Financial, a wholly-owned subsidiary of Mortenson, Matzelle & Meldrum, Inc., based in Madison, Wisconsin, both started out as life and employee benefits agencies and then moved into P-C insurance. Kibble & Prentice administers benefits for more than 60,000 retirement and employee plan participants. “Whatever the size of the firm, we customize financial services to meet the firm’s needs in these areas,” says Bill Walker, account executive. “Under financial services, we do estate planning, asset management, personal insurance and family office services. Right now, we believe, conservatively, that we have products that cover our clients from A to X. In reality, we’re probably more like A to Z, but we always wonder if there’s something we’ve missed. If we have missed something, we’ll find it.” Mortenson, Matzelle & Meldrum has more than 100 employees operating in multiple offices. It began in 1968 as a life and financial planning company. “We then moved into employee benefits, investment planning and college savings plans,” says Chris Henderson, director of M3Financial. “Then, we added property and casualty insurance products. We have found that the more successful multiline agencies started from the life side.” Both Walker and Henderson say their firms have dozens of employees who have passed the Series 6 and Series 7 NASD exams so that they can deal with investment-related products. Bank ownership of property/casualty agencies is a trend that bodes for greater sales of financial products to property/casualty customers. Banks already have their own personnel who sell a variety of financial products including annuities and IRAs stocked with a whole range of investments. When they buy a P-C agency, it is partly to sell these financial products to the P-C agency customers. n |
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