3 50 james green & robert kerzner

The Future of Independent Agent Distribution


Jamie GreenVice President, Market Strategy

National UnderwriterSummit Professional Networks

Profile of Today’s Independent Professional

Methodology:In November and December of 2013, LIMRA and National Underwriter conducted an online survey of approximately 750 independent professionals, representing all experience levels. Seventy percent of respondents were independent agents and the remaining were other independent professionals such as registered representatives of independent broker dealers.

Purpose: to better understand the profile and preferences of independent professionals. The results will help organizations provide the products, services and support that will maximize advisor productivity and strengthen relationships with independent agents and advisors.

Producer Generation

3%

18%

59%

20%

Gen Y Gen X BabyBoomers

Silent

26%

33%29%

12%

Under 50 50 to 59 60 to 69 70 andover

Producer age group

Baby Boomers represent 6 in 10 independent producers

Only one quarter of independent producers are under 50

Source: LIMRA/National Underwriter Advisor Survey, 2013

73% 74%83%

92%

4% 7% 3% 2%3% 4% 2% 1%12%

5% 2% 1%3% 1% 1% 2%


White African AmericanHispanic AsianOther

Producer age group & ethnicity

80% 84%93% 93%

20%16%

7% 7%


Male Female

Producer age group & gender

7% preferred not to respond

Diversity still a challenge in the independent channel


Business Mix by Age

35% 34% 34% 33%

12% 14% 18% 24%4% 3%

4% 2%16% 19%20% 20%14% 14%11% 14%14% 12% 9% 3%6% 5% 4% 4%

Under 50 50 to 59 60 to 69 70 and over

Life insurance Health insurance P&C Annuities Investments Advisory Other

As a percent of sales or revenue

Among older producers: Advisory services make up a smaller amount of revenue Health insurance sales increase Life insurance remains pretty steady


Business Mix by Focus

50%

13%

27%

3%

6%11%

28%

3%

25%

1%

22%

3% 8%

Insurance focus Investment focus

Life insurance Health insurance P&C Annuities Investments Advisory Other

As a percent of sales or revenue

Insurance focus: 50% or more of revenue comes from health, life or P&C insurance

Investment focus: Less than 50% of revenue comes from health, life or P&C insurance

83%

16%


Two-thirds of clients are 50 or older

10%

22%

35%

29%

3%

Under 35 yrs 35 – 49 yrs 50 – 64 yrs 65 – 79 yrs 80+ yrs


Age of Clients

15% 9% 9% 7%

27%22% 19% 20%

30%38% 39%

33%

25% 27% 30% 37%

3% 4% 3% 3%

Under 50 50 to 59 60 to 69 70 and over

Under 35 yrs 35 – 49 yrs 50 – 64 yrs 65 – 79 yrs 80+ yrs

Age of Advisors


What is the current state of your practice?

28%25%

30%

12%

5%

Still establishing itself Established and hasa stable client baseand revenue stream

Established, has astable base and is

now looking foropportunities for

expansion

Established but hashad some years of

negative growth

Other, describe:


31%

24% 24%

15%

6%

24%26%

37%

9%

4%

Still establishing itself Established and has astable client base and

revenue stream

Established, has a stablebase and is now looking

for opportunities forexpansion

Established but has hadsome years of negative

growth

Other

Insurance Focus Investment Focus

Insurance focus: 50% or more of revenue comes from health, life or P&C insurance

Investment focus: Less than 50% of revenue comes from health, life or P&C insurance


WHAT INDEPENDENT PROFESSIONALS VALUE

What attracted you to a career in financial services sales?

Under 50 50 andolder

Income potential 90% 78%Opportunity to be my own boss 62% 56%Opportunity to make a difference in people’s lives 58% 52%Career potential 34% 36%Flexible work schedule 33% 39%I like to work independently 16% 26%Challenge of selling financial services 5% 10%Opportunity to work as part of a team 4% 5%Other 5% 7%


Percent ranking item

Why Independent?“Ability to offer multiple solutions. Able to offer my clients the best product I can, able to provide the best product for my clients, without having to push one product over another…customize a plan that fits their needs today and into the future.”

“After working as a career agent and enjoying some of those benefits, I started to lose business to independent agents. I decided that I wanted to stop losing business and I like the idea of putting my client first and an insurance company second.”

“Having access to a lot of different products so I can design the right solution for my clients with products from different carriers if necessary. Also I like the income potential and not feeling pressured to make sales quotas or push certain products. I also like the ability to develop my own niches including specialized service offerings. I am a CPA as well so like to integrate the two disciplines.”

“I am a mother of 4 and need to have a flexible schedule which I am allowed as an independent advisor. I am a self-started and I like the freedom and flexibility of running my own business. I like the financial industry and enjoy helping people.”


How do you prefer to place your fixed life insurance and/or fixed annuity business?

51% 49%

Directly with the insurance company Through an intermediary (e.g., brokeragegeneral agency)

Producers are split on how they prefer to place their business


How do you prefer to place your fixed life insurance and/or fixed annuity business? by What is the current state of your practice? Is it…

57%

43%

51% 49%43%

57%57%

43%

Directly with the insurance company Through an intermediary (e.g., brokerage generalagency)

Still establishing itselfEstablished and has a stable client base and revenue streamEstablished, has a stable base and is now looking for opportunities for expansionEstablished but has had some years of negative growthDecline

Growth

Independent producers turn to intermediaries to drive efficiency and achieve scale


More than half of independent producers find support useful

How useful is the support you receive from your primary wholesale insurance brokerage agency?How useful is the support you receive from your primary wholesale insurance brokerage agency?

16

42%Somewhat

useful

54%Very useful

Not useful4%

77% have used a wholesale insurance brokerage agency in the past 12 months

53% of producers have been working with their primary brokerage agency for 5 years or less


Majority of independent producers are happy and unlikely to move their business

6%

43%52%

I am not happy with the support I receive and plan to move my businesselsewhere.

I am generally happy with the support I receive but would consider moving my business elsewhere if a better offer comes around.

I am very pleased with the support I receive and am very unlikely to move my business elsewhere.

65% expect to contact at least one brokerage agency they’ve never worked with before to inquire about their products and services.


Value PropositionRating of various factors, regardless of whether they are received or not.

1

2

34

5

6

7

0%

5%

10%

15%

20%

25%

30%

35%

1 1.5 2 2.5 3 3.5 4 4.5 5

1: Training and education

2: Coaching and mentoring

3: Remote sales support

4: In-person sales support

5: Technology management and support

6: Marketing services

7: New business processing support

Not at all important Extremely important

% n

ot re

ceiv

ing

enou

gh


Meeting clients’ needs top independent producers’ priority list

26%

37%

39%

34%

43%

38%

34%

34%

18%

21%27%

34%

34%

40%

51%

57%

58%

78%

Training/development

Technology support

Speed of policy issue

Compensation

Underwriting flexibility

Product selection

Financial strength/ratings

Ease of doing business

Ability to meet client needs

Factors rated extremely or very important when placing business

Extremely important Very important


Robert A. KerznerPresident and CEO

LIMRA, LOMA, LL Global



More than a quarter of advisors plan to leave the business within 10 years

More than a quarter of advisors plan to leave the business within 10 years

33%

41%

10%

10%

6%

I don’t plan to retire or sell my practice

More than 10 years

7-9 years

4-6 years

1-3 years

26 percent of advisors plan to retire or sell their

practices


What Will Most Influence Distribution in the Future?

Regulation

Demographics

Technology

Increased Regulation Worries Advisors

“Reduce the burden of government regulation.”

“Less regulation & oversight...too much to deal with now.”

Q: What needs to happen to sustain and/or grow the independent agent model?

“Less government restriction on Internet applications.”


“Less regulations.”

Norway Finland

Commission Advice Under PressureCommissions Banned in 2007 and 2008:

United Kingdom NetherlandsAustralia

Countries Where Commissions Will Be Banned in 2013:

Source: Bye-Bye Commissions, LIMRA 2012

Regulators Believe:

Commission sales are inherently “conflicting” — lead to lack of objectivity.

Fee-based sales remove all bias.

Consumers are willing to negotiate & pay for advice.

Low-cost, free advice will be more available.


Consumers Say They Prefer Flat Fees

Commissions Flat Fee Annual Fee

Develop and implement a plan for retirement income

9% 55% 13%

Develop and maintain a financial plan

10 55 13

Advice on insurance type, amount, and options

9 58 8

Advice on which types of investments to buy or sell

11 54 11


1 in 5Consumers are willing to pay more than $100

for advice

Consumers are willing to pay far less than the cost of providing advice.


80 percent of U.S. consumers will pay less than $100

Americans owning individual life insurance is declining

72%

65% 62%

55%

50% 50%

44%

1960 1976 1984 1992 1998 2004 2010

% of households

Source: LIMRA Life Insurance Ownership Survey, 2010

History: U.S. Growth in Numbers 2000-2010

2.2 3.8 4.1

15.2

White African American Asian Hispanics

(all numbers in millions)

Source: U.S. Census Bureau

Projected Growth Over the Next 20 years …

10 million

8 million

9 million

36million

White

AfricanAmerican

Asian

Hispanics


28%

39%

41%

46%

Boomers

Generation X

Generation Y

Gen Next

Percent of Americans Who Are Hispanic and/or Non-white

Younger Generations Are Increasingly Diverse…


Hispanics More Acculturated More Likely to Own Life Insurance

Percent Owning Individual Life Insurance

Percent Owning Group Life Insurance

Percent Not Owning Any Life Insurance

Less Acculturated 29% 47% 48%No Child in Household 28% 47% 53%

At Least One Child 29% 46% 50%

More Acculturated 53% 59% 32%No Child in Household 47% 53% 35%

At Least One Child 59% 63% 29%

General Population 58% 68% 23%

Source: Financial Protection for Hispanics, LIMRA, 2013

Wives earning more than husbands

4%

29%

1970 2009

Source: Pew Research Center

Household financial decisionsWhen Husband Earns More

Husband21%

Wife46%

Share33%

When Wife Earns More

Husband35%

Wife37%

Share28%

Source: Pew Research Center

In their own words…“Keep up with new products and technology but still

keep a personal interest in the client.”

“Technology needs to be infused at a greater rate to attract new agents.”

“Technology advances to reduce time spent on administrative tasks.”

“Support must be easily available from carriers who use independents…and from companies that provide

technology to the independents.”


Will the face-to-face of the future be the same?

These People are 57 Today

Top reason consumers shop for life insurance

41% cite life event

Source: LIMRA 2011 Buyer Nonbuyer Study

Source: American Bankers Association, A18-34 preferred banking methods

of Millennials preferred to bank at Branches or

ATMS52% 2008 25% 2012

Millennials Moving Toward Mobile

of Millennials said mobile was their preferred

channel

0% 2008 15% 2012

of Millennials preferred to bank online

25% 2008 45% 2012

But What is Face-to-Face These Days?

From Surfer to Sale….

You seem to need more information on term life insurance. Would you like help calculating how much you need?

Click here for more information.

Leverage technology to issue in real-time

MetLife Partners With Walmart to Sell Life Insurance in Stores

“If you are in the way of a steam roller, either get out of the way or become part

of the road…”Phil Billingham, strategy consultant at IFA support provider Threesixty

Bradesco using POS machines to sell life insurance

Employees Prefer Buying at the Workplace

Employer Agent or Broker

InsuranceCompany

Internet No Preference

Life insurance 44 15 19 4 17

Disability insurance

58 9 13 4 17

Long term care insurance

78 12 16 4 20

Dental insurance

65 5 11 4 15

Vision care 63 5 12 4 17

Source: What is $1 Billion an Hour Worth?, LIMRA (2011)

Who has the data?

NY Life Launches Regional Pilot to Generate Leads for Producers through AARP

Pilot was so successful that NY Life launched a nationwide campaign this year.

Economy & Finance

3 50 james green & robert kerzner