Who Should Sell Life?

WHO SHOULD SELL LIFE?

Selecting the party that will sell your Life insurance is a crucial decision.

There are pros and cons to every possibility. Life business can be sought by:

• P/C Producers

P/C producers know clients and can arrange interviews for Life products easily. Some incidental facts about individuals -- lifestyles, driving records, business and medical history, for example -- might be useful in placing Life cases and avoiding underwriting problems.

Time-P/C producers usually have full days selling and servicing P/C accounts. Squeezing Life production into a P/C workday might mean that the following will suffer: Proper research, shopping, or preparation for the case; proper handling of the application or its underwriting duties (exam, medical history follow-up, etc.); development of potential referrals for additional Life business; and P/C production that would otherwise have been developed.

Expertise-'Easy' Life cases and 'one-company-is-good-across-the-board' situations are rare these days. Even the simplest case can cause nightmares in the wrong hands. The conscientious agent must know much more than ever before. Life is fast-changing and demanding. Casual or part-time producers can fall far short of passable work. And if a competitor finds an opening, it is not just the vulnerable Life policy, but the entire account (including the bread-and-butter P/C business) that might be lost.

Unrealized potential-Even if the pitfalls are overcome, most P/C agents will not be able to address the real potential they have in Life. Every account is a prospect for Life, but Life involves much more than Life insurance alone. It should also involve Disability Income, Medical Expense, and related categories for Personal Lines. The list is potentially endless for Commercial Lines.

• Outside Personal Producing General Agents (PPGAs)

The advantage of PPGAs is that there is little or no overhead, since they're usually not housed in the P/C agency. There is also no responsibility to deal with carriers -- sometimes you can even avoid contracts. 'Here's a lead; tell him I sent you and we'll split the commission,' is a common basis for this relationship. The single lead might grow to a string of leads, but it's still more or less a handshake relationship.

Control-You probably have little or no control in such matters as selection of carrier or type of policy, communications between agent or carrier and insured, vested renewal commissions, referrals, and other matters. If the PPGA is terminated by the Life carrier, you might find competing Life agents calling on your insureds, perhaps with competing P/C agents alongside.

Unrealized potential-Typically the easiest, more obvious, and most attractive prospects are picked and approached, leaving the bulk of the agency's insureds unapproached. That's bypassing what might well be the richest potential. That's also leaving your agency open to claims of neglect on Life lines -- a dangerous omission.

• Brokers

Generally, the better Life brokerage firms can offer expertise and products to P/C agencies. Some will even assign one or more producers to an agency on a full- or nearly full-time basis. Some brokerages are independent and represent a range of different companies, granting production bonuses on the basis of all business written, cumulatively, through that brokerage. Other brokerages are captive or represent only one company, although some will recommend or effectuate business to be written elsewhere when appropriate. Some of your P/C carriers might have such brokerage offices in sister Life companies.

Control-Your control is less than total. Even when your name is on the application as producer (as it should be, when possible), the field agent writing and servicing the business is not under your control, even though he or she might represent him/herself as being 'from your agency.' If that broker leaves the brokerage firm to affiliate with a competing P/C agency, you could lose the accounts of clients who have built strong relationships with that broker (a strong non-compete, non-piracy agreement could lessen this risk, however). Referrals might be unknown to you and unreported. Choice of companies is limited.

Unrealized potential-Two sets of firms and their respective overheads (your firm's and the brokerage firm's are being fed by your Life business. Expenses are overlapping (and therefore, diminish available commissions) even when the brokerage gets overrides and enjoys efficiency of scale. The commission received by your agency might in some cases be split among you, the P/C account exec, the office manager, and a CSR. That's a lot of slices in what might be a thin pie to begin with, since the brokerage firm must pay the producer.

Caveat-Check the producer's contract with the brokerage firms. A pattern is emerging in lawsuits in which the agent on the lowest rung of the distribution chain (that might be you!) is left alone to defend an alleged wrong suffered by an insured. This might occur when the carrier and one or more intermediary 'brokers' all disclaim responsibility. We witnessed one such case, for example, in which a Group case account passed through three 'brokers,' and all protested their innocence, one even claiming he did nothing but accept mail and send it ahead. But there was no contract between the agent and any of the brokers, nor between agent and carrier. There was a big claim for negligence.

Although none of these choices is ideal, many -- probably most -- P/C agencies have Life business written in one or more of these sources. These are probably the easiest means of generating Life business, albeit the least profitable and riskiest compared with the full-time in-house Life professional. That is the most satisfying in many ways, as you shall see.