Winter 2007 / No. 70
Manufacture and distribute
The
current carrier model that predominates has the carrier manufacturing
all (or most) products and building and maintaining distribution
capability, although there are quite a few companies today that
are manufacturers only.
Five years ago, we published our most popular study, 2020,
A Clearer View of the Future, which described our predictions
for the benefit industry by the year 2020. Among the many attention-getting
predictions was that carriers would ultimately compete on product
values alone, getting out of the distribution and even the
administration business. This discussion was predicated on
the rise of new structures that would serve as TPAs and broker-dealers
while aggregating production. These organizations would become
the key clients for the carriers.
Today we are seeing rapid expansion in TPA services and the
beginnings of true voluntary distribution aggregation. From a
carrier’s standpoint, the new aggregators can look mighty
tempting. They promise high levels of production without any
of the headaches of recruiting or cultivating distributors. Maybe
the compensation needs to be a little higher, but look at the
savings!
But there was another half to the prediction. Carriers who follow
this route must be ready to compete on product values, which
today often include administration. Aggregators have to provide
the best products and compensation possible, or they won’t
be aggregating for long. So no matter where the producer came
from, if the carrier can’t be fully competitive on product
values, he’ll eventually lose out. And although 2020 is
coming, distribution is still the key to success. And as we know,
if a carrier gives an aggregator the keys to its business, it
shouldn’t be surprised if it gets locked out! |
