The life insurance industry has been very slow to embrace modernity and adopt systems that allow it to move more nimbly through the information age. As an industry it has blamed it’s lack of keeping up with the times as a security/compliance concerned coupled with an economic disincentive to spend a large amount of money on an infrastructure that will not boost return on equity.
There may be some truth to that last element, but I’d argue the focus is placed elsewhere largely because the industry knows that its current system (selling locally through agents who focus more on relationships than raw numbers) is a really good model for bringing premium dollars without a lot of technical justification.
But does the typical consumer gain from an insurance industry that is trying largely to hold onto a distribution model as outdated as a Sony Walkman? I’d argue no.
An industry that tries to keep its sales process local is always suspect. I’ve often stated that the key thing keeping us honest at the Insurance Pro Blog and Salus Agency is the fact that we are a national brand. We don’t have the luxury of moving from town to town taking advantage of the locals only to move on quietly after nightfall just before the jig is up and start all over again somewhere else.
The insurance industry remains insistent that it’s products require a personal “touch” and that touch comes in the form of Ned the agent’s sitting with you at your kitchen table to discuss your life insurance needs and why his company’s whole life product is the best product on the market.
But missing from this process is the part when Joe the consumer looks over the offerings that Ned’s competitor has to offer. Ned isn’t going to talk about it, and he’d rather Joe not even consider it.
And you see, it’s a whole lot easier to get someone to act swiftly when your sitting at their kitchen table, than it is if you’re talking with them over the phone or by email. Ned can convince Joe he needs to apply today and this often stops Joe from worrying too much about what else is out there.
Have you ever gone to the store to buy something and been ready to buy but had a moment when you pause and think “I should check Amazon?”
Or simply what the competing retailers are charging? Depends on the purchase I’m sure. Sandwich bags might be a dollar cheaper across town, but I’m here now so congratulations store I stopped in on.
A major purchase on the other hand warrants more comparisons shopping, and I’d dare suggest that life insurance can be a pretty substantial purchase—even when it’s just term insurance.
I’ve been ready to pull the trigger at the store numerous times when I think last minute to check Amazon for the same item and often find it cheaper there—bad news for Mr. Brick and Mortar; good new for Jeff Bezos.
But it’s not just price that comes into play regarding life insurance and/or financial products. Since the products do require a degree of management and ongoing guidance, skill of the agent/advisor/whatever can also be a huge consideration.
We receive emails and phone calls from people on a weekly basis who want to work with us simply because they’ve decided we know more than the local guy or gal to whom they had spoken.
The financial services industry needs to realize that the expense and effort that will go into modernizing its systems will likely be motivated less by the new business it will drive and more by the necessity in order to retain current clients and therefore revenues.
On top of this, to remain competitive and simply keep new business at an even level, insurers and other manufacturers of financial products will need to deliver on the ever-growing demand for technologically advanced tools afforded to clients.
To ignore all of this in favor of an outdated distribution method could spell trouble for the industry. It’s time not to run away from the crazy people who want to embrace technology and use it to their advantage in forging new client relationships in ways the industry could never imagine just ten years ago.
Instead we need to accept that the paradigm has shifted, a new generation is taking over the world, and that generation grew up on systems that placed more information at its finger tips than the previous generation could generally gather during its entire formative years.
There’s no real need to buy locally from an agent. Unless you are lucky enough to find one locally who is competent and trustworthy. And the market place has rapidly evolved to enable any consumer to search nationwide for an agent who can help them with their needs.
Brandon launched the Insurance Pro Blog in July of 2011 as a project to de-mystify the life insurance industry. Brandon was born in Northern New England, and he currently calls VT home. He attended Syracuse University and graduated with a triple major in Economics, Public Administration, and Political Science.