Brokers becoming a primary distribution focus for life insurers

Life insurance and annuity carriers are focused on growing distribution through brokers. Direct-to-consumer sales, though, reign king.

Jul 8, 2016 @ 12:14 pm

By Greg Iacurci

Life insurance and annuity carriers are turning their attention to brokers, primarily those in the independent broker-dealer channel, as the preferred distribution outlet among the universe of financial intermediaries, according to a new Aite Group research report.

Over the next two years, 11% of insurers report they have plans to introduce distribution through brokers, which would bring the percentage of carriers distributing product through this channel to 61%, according to the research and advisory firm.

Comparatively, the second-place channel — independent insurance agents — is currently at 50% of the total and isn't projected to grow further in the next 24 months.

“With the agent channel being the primary focus for so long, most of the time and money invested in this channel is on improvements. The broker segment is gaining traction, however,” according to the report, "Life and Annuities: Shifting to Direct-to-Consumer Channels." “This new focus could make the broker segment the most popular agent type, beating out the independent agent.”

A new Labor Department regulation raising investment advice standards for retirement accounts is a likely cause for this shift, Samantha Chow, senior life and annuities analyst at Aite Group and the report's author, said.

The Department's fiduciary rule, implementation of which is being phased in starting April 2017, will likely lead insurance carriers (particularly annuity carriers) to up distribution through independent intermediaries, rather than captive or career distribution forces that can only sell proprietary product, Ms. Chow said.

Being able to choose among products from many insurers when working with clients as opposed to just one company's products enables easier selection of a product in a client's best interest, she explained.

Distribution through brokers has been up for some annuity products generally, though. Fixed-indexed-annuity sales through independent broker-dealers, for example, got a 6% bump in 2015 over the prior year, according to Limra. And the DOL's fiduciary rule makes it likely that flow will increase, experts say.

This distribution trend is playing out amid the broader trend of insurers building out direct-to-consumer distribution.

“The agency distribution channel is no longer the most commonly used channel by life and annuities carriers, as 94% of respondents report using direct-to-consumer (D2C) channels versus 83% using an agent,” according to the Aite Group report published on June 29.

Further, 100% of respondents, who include 18 senior-level executives at life insurance and annuity carriers, said they will be using direct-to-consumer channels over the next two years, “indicating that this is the primary focus for carriers,” the report said.

This channel includes sales made online, via telemarketing and call centers, and through direct mail, for example. Agency distribution encompasses brokers, registered investment advisers, independent agents, career agents and multiline exclusive agents (who sell many types of insurance products for one company).

“[Insurers] are just trying to be consumer centric,” Ms. Chow said.

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