Designing Products That Sell.

Life insurers who do a good job of listening to agents and brokers will do a better job of creating products that meet customer expectations.

If the life insurance market is to meet consumer demand for wealth-building products, we need to start by getting the components of the distribution system into sync--companies, brokers and agents. Unless we solve this problem rapidly, others in the financial-services industry will eat our lunch.

Perhaps the place to begin is with insurance companies that manufacture products that fail to meet consumer needs. The first-to-die product, which insures multiple individuals and pays off on the death of the first one, is an example of a good but poorly designed product. It didn't take long to figure out that this whole-life product benefited companies but had little value to the consumer. Buying two term policies is more cost effective.

The product's current comatose state suggests a primary fact of business life: Unless a product is designed to meet a need, it won't sell. The day of selling what's on the shelf has long passed--even in the life insurance industry. Some career agents ignore the "Stop! Don't go outside the company" signs for one reason: They want to keep the customer.

It's exciting to see the many ways the life insurance industry is transforming itself. What's taking place today is undoubtedly a prologue to what will come in the years ahead. The revolution is under way.

* Every study shows that agent-customer interaction is going to be around for a long time. We seem to live our lives at warp speed, but nobody wants to make mistakes when it comes to financial decisions. So we take our time before signing on the dotted line. By the time clients are ready to talk with an agent, they have formulated serious questions and expect informed answers, not a sales pitch. Then, they want to take time before making a decision. The products available today require education, understanding and discussion. "Canned" illustrations are so ineffective and are often viewed negatively by consumers, because they appear cold and impersonal. They just don't seem to fit a particular human situation. Astute and knowledgeable agents who take the time to understand the customer will continue to have an enormous sales edge.

* The insurance company has a valuable role to play in creating products that meet marketplace needs. Why didn't companies look at the marketplace before creating first-to-die policies? Instead of pushing whole life, why not package two term policies? This fiasco could have been avoided if the companies had started with what was needed, rather than what they wanted to sell.

Insurance companies have every opportunity to get it right, simply by doing a better job listening to agents and consumers, Why did it take so long to get long-term-care products that consumers were willing to buy--and agents were willing to invest time and effort into selling? The one place Americans dread most is the nursing home. Yet, the early long-term-care products emphasized nursing-home coverage. It took years to get it right and include meaningful home-care coverage.

* The best decisions are made as close to the consumer as possible. If the life insurance industry is to climb out of its long-standing sales doldrums, more decisions should be made in the marketplace.

The basic issue is empowering agents so they will be motivated to sell more. It's easy to find what works. Companies can cut costs and increase sales by outsourcing underwriting and product design to the large insurance brokerage firms. Since brokers are entrepreneurial, they focus 100% of their attention and activity on serving their customers, the agents. This is because they understand that no one gets paid until a case is closed. What is needed are insurance companies committed to creating products that meet customer expectations.

Daimler-Chrysler may be the No. 3 automaker in the United States, but it is No. 1 when it comes to hitting home runs. Its head-turning, retro PT Cruiser is a winner. This consumer focus always wins, and it's far ahead of trying to force distributors to take more product.

The system seems so simple: companies that listen to consumers, distributors that focus on delivering what's needed and agents who take care of customers. It works because we all are doing what we do best.

Ronald D. Verzone, a Best's Review columnist, is president of United Underwriters Inc., Exeter, N.H.