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Finding the Right Insurance Partner
By Carol
X. Vinzant
From
Registered Rep,
June 1, 2003
So you want to sell insurance?
Before you can start, you will have to
figure out which company to buy it from a daunting task, given the
number of potential providers for any given type of product. But there
are some easy ways to get the list of candidates to a manageable size.
For starters, examine the companies'
credit ratings, says Eric Henderson, associate vice president and
variable annuity product manager at Nationwide Financial. He also
recommends checking whether insurance companies have reinsurance.
Some companies are being very prudent
at managing risk, and other companies are being very aggressive,
Henderson says. I'm seeing benefits guarantees at 5 percent, 6 percent,
even 7 percent. That is going to be a red flag in my mind.
Next, look for signs of stability. The
largest companies tend to have a margin of safety because of their
diverse offerings. They also tend to have more reserves, long track
records and plenty of reinsurance.
By contrast, companies with only a
couple of lines of business are more risky because they are more exposed
should one of the lines get hard hit with claims.
I prefer to use companies that are
recognizable, says Stephen Murphy, a financial consultant and vice
president of investments at A.G. Edwards in Las Vegas. I don't want to
spend 20 minutes explaining some insurance company you've never heard
of. Murphy, who sells Hartford products, keeps a copy on his wall of
the life insurance policy that Hartford Life wrote on Abraham Lincoln.
Of course, wirehouse employees live
with a range of choices made on their behalf, but most of those choices
tend to be conservative ones. Independents, meanwhile, rely on
aggregators. These wholesalers should provide ways to compare policy
prices and the safety and soundness of companies. Either way, you still
end up with something of a supermarket of companies to choose from.
The next issue confronting you will be
rates that you'll charge the client an important issue to be sure, but
one for which you can receive plenty of guidance from the carrier.
After that, you are left with the
commodity that is the actual policy. A few companies might help you to
set yourself apart by offering extra service to you or to your client,
and knowing companies like this can be a valuable way to differentiate
yourself.
Murray Gordon, president of MAGA
Limited, a long term care insurance agency located in Deerfield, Ill.,
says that it helps to understand how companies differ in their coverage.
If the person is insulin-dependent, John Hancock may be the only one to
offer a policy, he says by way of example. You have to know what each
company will accept or consider.
After evaluating companies for safety
and soundness and after factoring in the specialties that might appeal
to your client base, you are nearly ready to choose a provider almost.
The last factor to consider is the
commission you will be paid on the policies you sell. Commission rates
vary from company to company, ranging from as little as 7 percent to as
much as 20 percent of premiums. But it might not be worth it to you to
choose an insurance provider based solely on fees. Think about the cost
to you of making up for poor support and service.
It's all about ease of use for me,
says Murphy. He prefers the handful of companies such as Hartford or
Protective Life that offer a simplified application process. I am not
interested in somebody's medical history, Murphy says. I would be
horrified to ask somebody about their hernia or whether they have
heartburn every night.
The commission rates at such firms tend
to be competitive, if not the highest in the field. But for people like
Murphy, the time and effort saved by abbreviated applications processes
and other support mechanisms make it easy to concede some minor
commission points.
I could make 15 percent more
commission selling somebody else's product if I chose to, says Murphy.
The commission is not the driving factor. Do I have to do a paper
application or can I get away without doing it? That is the critical
issue for me.
He uses Hartford because, in addition
to offering policies with no physical, they handle the paperwork and let
him track the application process online.
He recently followed on the Internet as
a client passed the interview and a blood test. He knew, almost in
real-time, when the policy was on its way.
Now that is awesome, he says.
