Seeing Opportunity And Going For It
October 9, 2014 by Linda Koco
The term life insurance news this week has Phoenix Companies teaming up with three independent marketing organizations and a call center and distribution for two new term policies.
That’s not the usual fare for term life insurance developments these days. In fact, term life sales have been dragging a bit industrywide. LIMRA reports that annualized term premiums fell 3 percent in the first half from the same period last year. Term life face amount and term policies sold also declined by 3 percent in the first half.
But Phoenix sees an opportunity in the market and is going for it. The company has debuted two term life policies for middle market households having annual incomes in the $30,000 to $100,000 range.
Here’s where the story gets interesting. Phoenix developed the policies with input from three independent marketing organizations (IMOs). These IMOs—Brokers Alliance, Shoreline Financial Group and National Agents Alliance—will be the exclusive distributors in the independent agent space, at least for now, vice president and product officer Mike Donovan told InsuranceNewsNet.
Independent agents who want to sell those term policies will need to sign up with one of the IMOs. This will be a way for the IMOs to attract more producers to the fold, he said.
Exclusive distribution arrangements are not unheard of. But in recent years, the pacts that get attention have been ones involving exclusive distribution of annuities, particularly fixed index annuities. The Phoenix arrangement is noteworthy because 1) it involves life insurance, and 2) the insurance is term life, not exactly a new type of coverage since it’s been around for decades.
There is another wrinkle to the launch too. This is that another distribution channel will be LifeQuotes.com (and other online call centers too as they come on board). The call center reps are licensed agents, but they can only sell one of the two policies, Donovan said.
One more surprise: The IMOs will provide training and marketing to the call center reps. In return for that, the IMOs will receive an override commission on the business those reps place, Donovan said.
It’s a partnership
The IMO/Call Center relationship is not adversarial, according to Donovan. In fact, the IMOs are the ones who brought, and will bring, call centers to Phoenix’s attention for possible participation in the sales process.
“This is set up as a joint partnership,” he said.
Phoenix does not foresee channel conflicts emerging from the relationship. A key reason is that the customers each channel attracts don’t overlap, Donovan said.
In the online channel, for instance, the customers tend to be people are looking for simple service that doesn’t involve a lot of time, he said. They tend to do life insurance research on the Internet, and after they narrow down their choices, they contact the call center to talk with a rep. They are comfortable using the phone to complete the sale.
By comparison, the IMO channel works with agents who interact with people who prefer face-to-face meetings, may have special needs, and/or may require a local insurance agent to assess choices within the context of other holdings.
There are three other factors that could help deter channel conflict, too.
First, Phoenix is marketing two versions of the products. These are Phoenix Safe Harbor Term Life and Phoenix Safe Harbor Term Life Express. They have similar features including living benefits, access to web and mobile quote tools, and use of a teleunderwriting service. But the former product can require additional underwriting while the latter is simplified issue. That may guide clients to one product or another, based on simplicity alone.
Second, IMOs can sell both versions of the product, while call center reps can only sell the express version. That gives IMOs and their agents little reason to complain about being prohibited from selling a product that the IMOs designed.
Third, Phoenix is targeting both products to different ends of the middle market. The term life policy has a face amount range of $50,000 to $1 million, while the term express product range is $25,000 to $400,000. That distinction will help steer business flow by policy parameters, not emotions.
Where other policy features are concerned, both products offer accelerated benefits riders for critical illness, chronic illness and terminal illness, at no extra charge, and an unemployment waiver of premium for issue ages 18 to 60, also at no extra charge. Both also offer an optional accidental death benefit rider up to issue age 65, for an extra cost.
Those are features that the IMOs wanted to see in the product, Donovan said, explaining that the living benefits fit the marketing story that makes sense in the middle market. “They address the question, ‘what about the uncertainties in life?’”
IMOs do see demand for term life insurance in the middle market, he added, a point undergirded by studies showing that the middle-market is underserved and under-insured.
That demand resonates with Phoenix, which has been focusing on the middle market, for both life and annuities, since 2009, Donovan said. The company previously targeted the high net worth market. Today, there are only five or six carriers actively going after term insurance for the middle market, he said.
Phoenix’s middle-market life portfolio includes not only the new term policies but also whole life (a final expense policy) and indexed universal life.