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Benefits Business Opportunities in executive benefits, group life Enrollment process puts agent on the road to trusted advisor status By Len Strazewski James C. McClure, III, CLU, grew up in the world of property/casualty insurance, helping out in the family business, a third-generation agency in Shreveport, Louisiana, that is now called McClure, Bomar and Harris LLC. “My dad was the property and casualty leader in town,” he recalls. “I remember seeing Rough Notes on the table in his office, and in 1974 he actually contributed an article to the magazine.” When the younger McClure turned 21 and graduated from college, he knew he wanted to make his mark in the insurance business, but he didn’t want to be the boss’s son in the family firm. He chose to be an independent life insurance agent, leaving Shreveport 20 years ago for Chicago and a career as an executive benefits and group life coverage expert with Lenox Advisors, Inc. Lenox Advisors has about 95 employees in offices in New York, Chicago and San Francisco and specializes in providing retirement and asset protection services to executives and affluent individuals. The agency markets life and annuity products as well as long term care insurance. Today, as the firm’s managing director, McClure says business is booming, and there is gold in executive benefits for property/casualty agents who are interested in adding to their product portfolio. Access to decision makers is critical for both property/casualty specialists and life agents, McClure says, and the executive benefits business helps them gain access to top-level executives. This can generate personal lines sales and also help build a “trusted advisor” reputation that P-C agents need in the commercial market, McClure says. “Assuming you are in the business to grow and make money, you are always looking for the opportunity to expand your relationship with your clients as well as introduce your services to new clients,” he says. Executive benefits marketing provides an ongoing opportunity to meet client executives during the enrollment process and build relationships that can pay off with commercial and personal lines sales, McClure explains. “Many property/casualty coverages have become commoditized. They are driven by price alone, and clients expect their agents to re-market the coverage every year and the agent with the best price wins. The executive benefits business can allow property/casualty agents to take the commodity element out of their service and build a continuing relationship with executives,” he says. Universal life is hot McClure specializes in group universal life and group variable universal life products (GUL/GVUL), which have become popular with companies that need to add to their roster of benefits without dramatically increasing costs. One of his firm’s top underwriters for GUL/GVUL and other executive benefits is the MassMutual Financial Group, one of several large life insurers that are actively promoting the GUL/GVUL executive benefits products. Other top carriers include MetLife, the largest overall life insurance underwriter, and Prudential Financial. John Laprade, managing director of executive group life insurance sales at MassMutual, says employers use executive group life insurance as a way to recruit, retain and reward their key employees. The programs are especially popular with professional services firms, corporations, universities and hospitals as a means to help reduce the overall cost of employee life insurance by carving out the often older executive team that requires more coverage from the group term life insurance pool. Group universal life is pool rated, while group term life is experience rated. Carving out the executives allows group term rates to drop to as low as 75 cents per $1,000 of coverage, making the total cost of providing additional executive benefits a bargain, Laprade says. When the low rates are combined with the convenience of group underwriting, the costs are usually below what employees could obtain individually, he says. The programs are often used for Section 162 executive bonus plans. “Employers can use the executive benefits to give some good benefits news to their top employees without dramatically increasing their costs,” says Laprade. MassMutual products include a GUL program that does not require securities dealer registration and GVUL, which features investment fund options. Group plans require a minimum of 30 participants and feature high limits of guaranteed issue coverage, portability after separation or termination from the sponsoring employer, continuation of coverage after retirement and no surrender charges. The enrollment advantage The commissions are fine, notes McClure, but the real marketing advantage in this business comes from what many agents and employers dread: the enrollment process. “Human resources departments are often overworked, underpaid and asked to do more and more without additional resources. They dread more administrative work, so they are generally happy to turn the job over to their agents,” he explains. The enrollment process isn’t the old paper chase, he adds. “It’s all done online, so there’s no paper management problem. We usually come in and use the employer’s own computer system to access the company enrollment link, so, for all intents and purposes, we become an extension of the employer’s human resources department, operating in their own office.” Because most employers mandate some portion of their executive benefits, which they supplement with optional additional coverage amounts, personal enrollment is a necessity. “We usually begin with a letter from the HR department and follow up with a phone call to answer questions and schedule a personal enrollment session,” McClure says. The individual sessions aren’t long—just three to four minutes—but McClure says he can learn a lot about the executives’ individual needs and begin a lasting personal relationship in that time. “In that short time, you can improve your status from just another agent to a true trusted advisor, creating a platform for other products, such as long term care, voluntary disability and personal lines coverage,” he says. Because executive turnover tends toward 10% per year, agents can count on a steady flow of new prospects. Property/casualty specialists can take their relationship with the corporate leadership to new levels, creating opportunities to quote on commercial property and liability risks without additional qualification. “As far as the executives are concerned, you have already passed the due diligence test. You are part of the team,” McClure says. Huge potential How much potential is there in the executive benefits market, particularly life insurance? While many property/casualty agents say that life insurance in general is a moribund market, tapped out for commercial producers, recent market research indicates huge market potential—if producers can expedite contact with prospective clients. According to the latest market research released in September for Life Insurance Awareness Month by LIMRA International, the life insurance industry marketing association, about one-third of Americans are not covered by life insurance and market penetration has not increased in 20 years. More than 25% of all U.S. households said they were likely to buy life insurance with the coming year, and 45% said they believe they are underinsured and plan to buy more life insurance in the coming year. Younger people are the best prospects. About 25% of males have some life insurance; but among males 18 to 24 years old, about two-thirds have no life insurance. About one-third of women have coverage; but among women 18 to 24 years old, more than half lack coverage. About one-third of Americans have only the group life insurance provided by their employers, and this segment carries the lowest total amount of coverage—making them ideal prospects for supplemental group life or group universal life coverage. Among executives, life insurance is still a perceived but unmet need, according to LIMRA research. One-third of affluent households (those with $100,000 or more in annual income) say they need more life insurance. * The author |
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