As a prudent business owner or key member of an agency management team, you should be concerned about a critical carrier conundrum. Many carrier executive teams are struggling with the issue of how they will distribute their products and services by the end of this decade. Why? In the last 30 years the industry estimates of the number of insurance agencies in the U.S. went from a high of approximately 125,000 firms (benefits, life & health, P&C, financial planning, etc.) to about 10,000 currently — with another wave of consolidation underway, driven by boomers retiring and the rapidly changing market conditions. In five or six years there could be fewer than 5,000 firms nationally. That is keeping insurance company executives awake at night.

So, have you asked your carriers what their strategy for distributing their products will be in the future? Will your carriers sell through a smaller number of brokers? Will they adopt a general agent model and hope that the GA can develop a large enough “downstream” broker network? Will your carriers develop new sales channels? Will some also sell direct to employers? And direct to consumers? Will they even consider creating their own proprietary exchange? Or collaborate with other carriers that offer synergistic (and non-competing) products and sell through their broker network?

We know of a number of executive teams that have already begun to grapple with this very thorny issue. They are coming to grips with the stark reality that doing nothing is not an option. And each option creates its own set of new potential problems. The likelihood is that there is no one right answer. Each executive team needs to assess its own capabilities and strengths and decide what will work best for their team, their stakeholders and their target customers. And for their existing brokers. Or not.

Please do not passively accept your carriers restating the threadbare cliché that they see themselves as a product manufacturer, which is code for “that’s not our problem and we don’t understand sales anyway.”

Without a well-conceived distribution strategy and enough distributors or methods of distribution, your carriers will find themselves with a dwindling customer base and shrinking revenues. Is that the legacy that your carriers will embrace? That’s not likely, right? So where does that leave you and your business? This is something you seriously need to consider and you need to get some definitive answers to these difficult questions because your livelihood depends upon it.


Broker-carrier relationship

So if your carriers will rely upon brokers to be at least a part of their distribution plan, what will they be willing to do to help you to sell more? What will your carriers do to help perpetuate your business and the broker distribution channel? What assistance will they provide to their distribution partners to perpetuate your business? What will they do to help you to recruit new talent into the industry? Where will the “new blood” come from? Will your carriers provide product and sales training assistance? Will they consider funding producer compensation subsidies? Will they provide resources to help to train future sales managers who can recruit, select, contract and manage sales resources? Don’t think of this from an altruistic perspective; consider this in the context of carrier and broker survival.

Suppose one of your carriers decides that marketing directly to employers or consumers is a viable second distribution channel, how will your team react? How will your executive team manage this channel conflict? Assuming that your carrier can develop or acquire the sales capabilities needed to operate a retail sales channel, how will you deal with them as a potential competitor? Your game plan needs to be well thought out in advance and cannot be after-the-fact and purely reactionary. It’s far too important, and if mismanaged, could result in the sudden migration of business to your new competitor. So what assurances are your carriers willing to provide you to minimize your very valid concerns?

And what if your carrier plans to also distribute its products and services through its own proprietary exchange, what role will you play? How will the carrier market its exchange? And will you be a part of the overall offering? Which products and services will be offered? And will your carrier be willing to pay you compensation for the advice and counsel you provide to employers and employees? Is your carrier still expecting to pay commissions through the end of this decade? Or will you need to negotiate consulting fees with your clients in exchange for your expertise?

Another related issue is, what will be your competitive advantage? What will your team do to further enhance the employer-employee relationship? What synergistic products or services can your firm offer that will make your core offerings more valuable to your clients and customers? Will you offer payroll services? HRIS services? HR consulting? Voluntary insurance and lifestyle benefits? And will your team build/partner/acquire to develop the requisite capabilities? Hopefully your team has been giving consideration to these issues for some time now because these are important strategic issues and your executive team’s decisions will have major ramifications. If not, what are you waiting for?

Kwicien is managing partner at Baltimore-based consulting and advisory services firm Daymark Advisors. Reach him at

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