'We don't want to be all things to all people,' says one agency manager, 'so we want to identify a niche for Life insurance agents to master. Do you have any suggestions?'
That's an interesting question, because the usual approach for P/C agencies is to try to meet the Life needs of all people, diverse as they may be, by having in-house expertise or by getting outside expertise to help handle it.
Some P/C agencies have become so well-known for expertise in a certain field that other agencies have called on them for help. In effect, Agency A splits a case with Agency B. Although that's not rare in P/C, it's a little different in the Life field. In Life or Group, the account-controlling agency (let's call it the 'ceding' agency) doesn't just use the other agency's carrier; it has the other agency's expert develop the account directly and build a close relationship with it. A strong feeling of trust is needed between agencies for this situation to exist.
In building a specialty niche in Life, the agency should recognize its obligation to meet the broad Life/Heath/benefits needs of all insureds, whether or not they fall into the specialty niche. This might require having outsiders handle those broad needs, but it should be done somehow.
We can identify some niches. For the mid- and long-term outlook, I would lean toward the following:
- personal financial planning
- business and professional financial planning
- employee benefits
Each of these niches is, separately, a big field with many subspecialties. Each is related to the others. Each niche includes pure insurance as an integral part, but each may also include more than insurance, such as investments, tax planning, retirement planning, and money management. Each of these niches is important in good times and bad, and each undergoes changes frequently enough that ongoing expertise is important. Just as important, the client can readily see why these niches are important and can appreciate the need for help. And each of these niches will be permanent needs which will survive any changes which might come in the insurance distribution systems. Further, I believe it will be difficult or impossible for computers to replace personal expertise in these three categories, with the possible exception of employee benefits. Even that will be a long time off because of the need for personal explanations and enrollers.
To illustrate, look at a few recent news items. One headline, 'Thousands of U.S. Employers Eliminate Pension Plans, Making Retirement Difficult For Baby Boomers,' appeared in the American Academy of Actuaries, June 1992. You don't have to be a niche marketer to identify this pool of prospects; they're everywhere, and you can reach them handily. The article relates that more than 30,000 U.S. employers have terminated their defined benefit pension plans since January 1990, and 39% of these employers have not provided their employees with new pension plans, leaving thousands of American workers without employer-provided pensions. Those people need help in planning and funding their retirement!
Another headline, 'Americans Growing Old And Poor: Unprepared Retirement Picture Bleak,' appeared in Life Association News, Aug. 1992. Quoting a recent survey by Merrill Lynch, the article reports that the savings crisis is far worse than previously believed and threatens the American dream of building a better life for successive generations. The study, 'A Rude Awakening From The American Dream,' found that as the baby-boom generation ages and life expectancy increases, the financial outlook is even more dire.
Here are some of the study's findings:
- During the next 25 years, the number of Americans between ages 45 and 64 -- the pre-retiree population-will increase by 70%.
- By the year 2000, 35 million people, or one-eighth of the population, will be over age 65.
- National health-care costs are expected to increase nearly sevenfold by 2010, when each person over the age of 75 can expect to pay an annual health care bill of $10,000, as a Forbes article predicted.
In the face of these statistics, half of all retirees during the late 1980s went into retirement with less than $10,000 in savings. Today's average 50-year-old has only $2,300 in financial assets or savings. Baby boomers are doing less than today's pre-retirees to prepare for retirement. More women than men say they feel financially unprepared for retirement.
In addition, the survey found that 35% of pre-retirees and 54% of baby boomers do not have a pool of retirement savings, such as an individual retirement account, savings account, or annuity, apart from an employer's pension or retirement fund.
Pre-retirees, the report continued, allocate an average of 11% of household income to retirement savings, 13% to savings of all kinds, and an average of 35% to household debt, including mortgage payments, credit card bills, and car loans.
These aren't just dry numbers; these are large groups of real people with (or without) plans for living and retiring comfortably. They need help in planning and organizing their financial lives. Many types of advisors would like to reach them-bankers, financial planners, counselors-but none has as easy access to them as does the P/C agency. With 35% of household income going to mortgage payments, credit card bills, and car loans, isn't it natural that you deliver an offer of money-saving help when you deliver the Homeowners or Auto insurance policies? What easier tie-in can there be? What greater need can there be?
Of all the financial groups-accountants, bankers, financial planners, insurance, etc.-no segment has as broad a base of prospects, as good a relationship with them, and as easy an entree to them as does the expert with the P/C agency. The sooner your agency builds a solid relationship with that kind of expert, the sooner you'll be on the road to multi-line success.