Over the past months in our work with Distributors we�ve heard over and over that New Business and/or Underwriting just aren�t working. This was highlighted in our Independent Financial Distributor Study and National Account Heads Survey in the summer as a key issue. NewLink Executive Consultant, Neil Silverman wanted to understand the why behind this issue, so he began talking to MGAs about this and other issues impacting MGAs.
In talking to a successful MGA, who�d been in business for many years, Neil wanted to know what was impacting his business. He expected to hear about competition, or maybe compliance. Instead, he was told a sad story about New Business and Service. Neil related, �I heard about dropped cases and screwed up cases and nobody who seemed to care at the carriers. And not just one or two carriers, but all carriers. In the past, there were always one or two carriers who did a decent job managing New Business, but today, he couldn�t find one. And he was frustrated; tired of the
mistakes; tired of being embarrassed when he was caught in the middle.�
As we started talking to more people, the message was alarmingly consistent. While the occasional response, always based on a strong relationship, was reasonably positive, the overwhelming majority of producers, MGAs, and National Accounts heads that we talked to were all frustrated with the current state of affairs. Frustrated to the point of suggesting that, if any carrier got it right, they would direct their business to them – even if the product or compensation were not quite as good.
In a NewLink survey of National Accounts Insurance Heads completed earlier this year, we asked them to tell us how important a variety of factors were in determining which carrier they would use or recommend for New Business. We used a scale of 1 to 10 where 1 is not important and 10 is extremely important/critical. We have asked this same question every year for the past 5 years. 5 years ago, Underwriting and New Business were in the pack. This year, Underwriting, New Business Service and Regional Sales Support (Wholesalers) were the top three issues. Underwriting rated responses from 8 to 10 with an average of 9.25. New Business Service rated responses of 9 to 10 with an average of 9.25. Further, in a more recent survey of Independent Financial Distributors, we asked the same question, and found that two of the top three factors and issues of concern were again Underwriting and New Business Service. There are a variety of reasons for the current situation in the market:
The growth of the independent channels market. Gone are the days when captive producers did not question the level of support they received. Moreover, gone are the days when a producer dealt with just one company, and so, was able to learn and work their systems and build effective relationships.
The loss of favored carriers, and with them, relationships. Whether you liked to work with New York Life, Westbury, Financial, Aetna, Commercial Union, Zurich, Canada, or Maritime, the fact is they are gone and you need to work with the remaining companies.
Those remaining companies are still standing for a variety of reasons � including they know how to manage expenses. Some of them simply do not have the financial will to provide the levels of service you are seeking. Further, do not discount the importance of the demutualizations of the 90s. These companies have much greater demands placed on them to reduce expenses and raise returns on investments.
Underwriting tends to get more conservative and liberal in cycles. A few years ago, it was easier to get favorable decisions from many carriers. It has become much more difficult in the past year. Flexibility on requirements is less likely. Total market underwriting capacity is down, making very large cases more difficult to put together. Today, decisions tend to be more conservative (insurers would say they are becoming more realistic).
What can you do to make the new business process less frustrating? A great deal is possible � on both the producer/distributor side and on the insurer side. We started out this article by telling you about producers who were so frustrated they wanted to move their business. Today they believe they have nobody better to move to. That will change! The opportunity exists for one or more smart carriers to substantially increase their business � profitable business. Who is it going to be?
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