What Indiana Jones Can Teach Insurers and Distributors About Cooperation

In addition to thrilling us with motorcycle stunts, a trip down an Amazon waterfall, and a daring rescue from quicksand, Indy taught us some interesting lessons this summer – and not just in his archeology classes at Marshall College.  He’s an average guy trying to survive extraordinary circumstances.  He is, of course, relentless.  He follows through on the smallest clues and details in order to track his quarry.  And he is intensely passionate about his pursuits.

In other words the fictional Dr. Jones can teach us some real-life lessons in how to work with our best business partners.

In my role at Phoenix, I have the pleasure of working with national accounts, the large independent broker/dealer networks that support thousands of financial advisors in multiple locations across the country.  And while I have yet to unearth an ancient artifact – and probably could never look quite as dashing as Harrison Ford – I have spent plenty of time working with my colleagues in insurance companies, and my partners at the advisory firms that distribute our products, to understand what makes these relationships successful.

The solution, I’ve learned, is as formulaic as a two-reel serial, but often impossible to duplicate.  We need to make the distributor-insurer relationship a win-win proposition.

Insurers need to provide the right products and marketing support while the distribution channels provide the “boots on the ground” that make these efforts real to our clients. 

Simply put, we need to work together – and to remember that the end game is not about the relationship between insurer and distribution channel.  It’s is about helping our clients.

And right now, the stakes couldn’t be higher.

According to the 2008 Phoenix Wealth Survey – our annual look at the financial attitudes of America’s high-net-worth consumers – a significant portion of the best potential clients have turned away from advisors:

• Thirty-three percent of American households with a net worth of $1 million or more say they don’t use an advisor, and 41 percent say they don’t have a primary advisor. Just five years earlier, those figures were 18 and 26 percent respectively.
• Today, 29 percent of respondents say they make all THEIR financial decisions on their own with little input from anyone.  That’s up from 25 percent in 2007 and 18 percent in 2002.

In short, there’s more momentum away from the advisor and towards a “do-it-yourself” approach to finding financial solutions, even among the clients who have the most at stake.  While this do-it-yourself approach might work for some home improvement projects, in the complicated world of financial products, an advisor is absolutely critical.

The good news for advisors is that nearly nine out of 10 clients who have a primary advisor are satisfied or very satisfied with that relationship.  When advisors demonstrate their value to clients, the clients understand and appreciate the service.

So how do we – insurers and distributors – improve this situation for the benefit of our clients?  Principally by understanding the different strengths each partner brings to the advisory relationship.

When Phoenix is looking to develop a partnership with a distribution channel, agency or advisor, we have some specific qualifications in mind, and very high expectations.  But in the spirit of being focused on the needs of the customer, let’s rephrase the question.  With more than 1,000 life insurance companies to select from, how does an advisor decide which companies are the right partners, and how does a national firm select insurers as core carriers?

It’s easy to say that an advisor, BGA or national wirehouse should expect the “three Ps” – price, product and promotion – when evaluating insurance carriers.  But there’s more to consider, including:

• Service: The IT function learned years ago that “service level agreements" are absolutely critical to balance the needs of the “clients” – in this case users of technology – with the capabilities of the programmers, analysts, and network technicians who design, develop and install new software tools or systems.  Insurers have instituted such agreements with their distribution partners as one of the mainstays of an open, productive relationship.  The insurer should be ready to quantify expected response times for a variety of functions, especially underwriting and policy issue.  Advisors are all too aware of the frustration of meeting with a client several times, finally getting an agreement to purchase a policy, and then losing the sale because the underwriting process stretched past 45 days.  In order to be effective, service level agreements between insurers and distributors should be tangible and develop unambiguous performance capabilities in areas such as times of operation, levels of availability, and policy processing turnaround.
• Underwriting: An insurer’s underwriting capabilities are at the foundation of its business, and prospective advisors must fully understand those programs and services.  The advisor should consider more than just service levels and the time it takes to underwrite a policy; rather, the advisor should consider the insurer’s underwriting staff – the number and qualifications of underwriters and medical directors – and the relationships the insurer has with the paramedical examiner.  The insurer’s underwriting capabilities also include its risk retention limits because higher limits (for example $10 million for permanent, single-life coverage and $12 million for survivorship policies) can speed the policy underwriting and approval process.  The advisor might also be interested in innovative pricing programs for special cases, such as Phoenix’s Healthy Measure RewardSM discount program that rewards policyholders who have a healthy body mass index (BMI) with up to 20 percent savings on the cost of life insurance.
• Dedicated Resources: A distribution network deciding whether to work with an insurer should be assessing the insurer’s support network, particularly the structure and location of the wholesaling teams.  A wirehouse or BGA may have a concentration of advisors in the Midwest while the insurer is heavily committed to the coasts; they both have a “national” footprint, but may not be able to synch up the locations.  In addition, the advisor needs to judge the experience level of the wholesalers, including their product knowledge and time in the field, and the insurers CRM systems to track contacts between wholesalers and advisors.  Advisors will also need access to other specialists.  Since Phoenix’s primary market is high-net-worth consumers – particularly the owners or executives at small and mid-sized businesses – we have tax, estate, executive benefits and business planning specialists ready to work with advisors.  Specialists such as these are an important resource, particularly for advisors at smaller firms who have relationships with clients, but may encounter unusual tax or estate planning cases in rare occasions.
• Commitment to the Relationship: Building and maintaining a smooth working relationship between the distribution organization and the insurer may be as complicated as producing a blockbuster movie.  The cultures and procedures of the insurance company and advisor organization are bound to be different, so there will be many opportunities for pitfalls.  Thus it’s crucial for the companies to develop working relationships that keep the lines of communication open at all levels, beginning with the senior leaders, and cascading through all sales and support functions.  Like many insurers, Phoenix has instituted Advisory Councils to give advisors and wholesalers opportunities to talk about the tactical issues that make a complex relationship work.  We also schedule regular calls between our underwriting teams and the distributor’s customer service specialists to ensure the advisors are properly submitting their apps and we’re living up to our time commitments and service agreements. 
• Compensation: As I have developed and nurtured relationships with distributors, I never underestimate the importance that compensation plays.  Obviously, it starts with suitable compensation for writing business and, when appropriate, providing trail commissions.  But the insurer will also be judged on the ability of its compensation system to process payments quickly and accurately, using all the variables that the advisor and the company need to track their business.
• Reputation and brand equity: It may be difficult to quantify the true value of the insurer’s brand, but every party in the insurer-advisor-client relationship understands that name recognition matters.  But does the customer come to an advisor because of the companies she represents?  Does the advisor sell the product or the insurer?  Strategic support from a well-recognized, well known company makes the advisor’s job easier, but only a few mega-companies have the luxury of spending hundreds of millions on consumer advertising, so most advisors will work with insurers that have modest consumer ad budgets.  Reputation and brand equity still matter, and it’s up to the insurer to reinforce its core values and brand message – and it’s up to the advisor to share that with the client as part of the sales process.

There’s no doubt the insurer has some expectations as well.  When we look to develop or expand new distribution partners, we are judging the distributor on the quality of its advisors, including their ability to manage multiple product lines; the regional or national scope of their business; and, of course, their willingness to dedicate sufficient resources to the partnership.

In the end, the advisor-insurer relationship is a mixture of attention to detail, an ability to work closely with the right partner, and an intense dedication to the cause.  That’s a lesson Indiana Jones can teach, so grab your fedora and get ready for an exciting ride.  But for the sake of your clients, just leave the bullwhip at home.



About the author:
Lou DiGiacomo, Vice President, National Accounts, at The Phoenix Companies, Inc., has more than 24 years of experience in the life and financial services industry. His focus has been on distribution of life insurance and other financial service products through multiple wholesale and retail channels.