PRODUCER GROUPS: ARE THEY RIGHT FOR BANKS?

by Valerie Jordan

Are producer groups an effective way for banks to build their insurance sales? Although Valerie Jordan has written this article from a bank's perspective, the questions she raises apply to producer groups, as well.

A producer group consists of independent insurance brokers and/or firms who join forces for a common purpose — such as a shared business philosophy, a compatible marketing strategy, or quality product offerings and compensation. These agents have experience in serving corporate and affluent clients and are leaders in their local insurance and business communities. Each member is capable of generating more than half a million dollars in annual revenues.

As the financial services industry keeps evolving, so do producer groups. No longer a super brokerage agency, today's group is a sophisticated, diversified financial services organization able to bring the latest products, services, and technologies to its experienced member firms/agents. Just as banks and insurance companies are forming homogeneous financial services entities, producer groups are following suit.

How can a producer group fit into a bank's insurance program? It offers an excellent way for a bank to provide financial planning advice and insurance products for its upscale, affluent customers or corporate customers. Using a group allows the bank to introduce a program quickly, eliminate the need to hire experienced agents, and avoid the process of building products and carrier offerings. Also, there's no need for computer and administrative systems to support these complex insurance and planning sales. If the bank operates in multiple states, the producer group affords a consistency of program, carrier and products, and the same high level of agent experience.

A bank evaluating the use of a producer group sales program should answer these questions:

• What criteria does the group use when selecting its contributing firms/agents? How many years experience do the agents have? Are they qualified to work upscale affluent customers as well as corporate customers? Do they hold such professional designations as ChFC or CFP?
• What products and carriers do they represent? Are the carriers top rated by Moody's, Best's, and Standard & Poor's? Are the products competitive and issued on a timely basis?
• What types of marketing support does the group provide? Will it assist in preparing illustrations or financial plans? Does the bank have access to expert assistance through marketing support representatives?
• What administrative and marketing systems does the group use? Can the bank utilize the group's marketing system; can they access their illustration and planning software?
• Can the bank access to group's technologies? Can it tie into the group's pending file to check on applications in process or verify commissions received and processed? Can the group link their bank page to the group's bank page?
• Does the group comply with all federal and state bank insurance regulations? Do they have the required operating and procedures manuals? Do they conform to the consumer protection laws in each state where they do business?
• How much control does the bank have over the program? Once the program is in progress, how much will the bank be involved in its day-to-day management?

As with any outside sales effort, the bank must consider the challenges that a producer group sales program will pose:

• How will the bank integrate a producer group into its overall insurance strategy? If the bank has both a direct response and a retail program, how will it combine each of these into one cohesive program? How can the bank cross–sell from these other programs to the producer group's sales?
• How will the bank position the producer group to eliminate customer confusion?
• How will outside agents work with the bank? What incentives must it create and how does it incorporate these sales into the sales objectives of the bank?
• How will the bank handle the sales culture differences? How will it train bank personnel to ensure the smooth introduction of outside sales agents, while also encouraging bank staff to refer customers to these agents?
• How much involvement will the bank have in selecting carriers and products offered to the bank's customers? The bank must have a role in product selection since regulations require it to perform product evaluation. This is a key responsibility.
• Finally, once the program is crafted, how will the bank protect itself from producer group agents potentially selling to its customers outside the bank? What contractual language does the bank require to protect itself from such outside sales? How much hands-on management will the bank need to ensure that this doesn't happen?

If you're unsure how to answer these questions or would like to learn more about producer groups, consult experts who know these groups and can recommend the right group that will match both your philosophy and your sales strategy.

The bank has many options when designing an upscale, affluent or corporate program from buying a Life agency, to building its own program, to renting an agency. Producer groups provide one way of renting an experienced Life agency to field a sophisticated program quickly and professionally.

Valerie Jordan is president of Jordan & Jordan Associates, a consulting services company in Chapin, SC. You can reach her at [email protected] or by visiting www.jordanandjordan.com.