Printer Friendly

A test of strength: review the checklists and discover how to beef up group disability and life insurance sales results.

Over the past 20 years, I how much has changed in the way carriers sell and market group life and disability? Has the sales process become less relationship driven? Are carriers any less dependent on their best reps and brokers? Do the sales objectives laid out by insurers in 2004 look dramatically different from those in 1994, or even 1984?

Other than the use of technology, little has changed in the way most distribution organizations market and sell group insurance. Carriers are still struggling to find the key to differentiation and wondering if profit and growth can ever be sustained simultaneously. By identifying the fundamentals that drive sales and working to achieve excellence in each area, however, carriers can improve results and develop strategies not easily mimicked by the competition. This focus on "blocking and tackling" may not be a revolutionary tactic, but it is one that consistently delivers results.

A Sales Results Framework

In late 2003, ZS Associates conducted a study of group insurers to discover how carriers approach distribution strategy and implementation. The study included 13 group insurance companies, representing more than 50% of the group disability market. Many of these companies also have significant presence in the group life, dental, and/or medical markets. By design, the participants surveyed were a mix of large and small carriers--a sample from the industry chosen to accurately understand distribution practices.

Drawing from this study, we developed a framework for the fundamentals of distribution--market knowledge, strategic alignment, people and support systems. (See "Distribution Fundamentals," left.) Then, we established a set of best practices for each fundamental, based on our observations of carriers. (See "Market Knowledge," "Strategic Alignment," "People" and "Support Systems" on pages 86 and 88.) The core concepts in this framework are not new--these ideas have been around for years. None of the carriers we studied, however, had reached "excellence" on each dimension. There is much room to improve the "blocking and tackling," and through that, to improve sales results.

The study revealed that competence on each of the dimensions is a minimum requirement for distribution success. By moving toward excellence, carriers can build and sustain results.

Based on the study results, we created a series of statements that describe excellent performance on each dimension. These checklists can be used to confirm areas of strength in your distribution organization, and also to identify gaps between your current performance and best practice levels.

Market Knowledge: How deeply do you understand your brokers and customers?

Nearly every company we spoke with studies its brokers and customers. The best carriers, however, were the ones that used that knowledge to focus and support their sales and service efforts. Unfortunately, disconnects between sales and marketing prevented many carriers from implementing sales changes based on their market research.

Consider the four statements in the "Market Knowledge" table. Where do your company's practices fall?

Strategic Alignment: How do you maximize sales efficiency and effectiveness?

Broadly speaking, carriers can differentiate themselves in four ways: Who they are, what they sell, how they sell and to whom they sell. The "who"--brand, reputation and financial ratings--and the "what"--products--are well-established points of differentiation in the industry. Many carriers are finding that these alone will not get them off the spreadsheet and into value-based buying decisions.

The latter two--"how" and "to whom"--are less regular points of differentiation for group insurers. Many carriers are at least starting to ask questions on these fronts: Should we be more consultative in our sales process? Can we be everything to everyone? The "Strategic Alignment" checklist illustrates some of the best approaches on these dimensions.

People: How do you build your distribution organization's most valuable resource?

With little else to differentiate them, life and disability carriers are increasingly dependent on their reps for sales success. Few carriers, however, devote significant energy to rep hiring and development or to sharing sales best practices. In contrast, top carriers invest in elevating the performance of all their reps and in developing "institutional" relationships with their brokers and customers, as shown in the "People" table. By doing so, these companies drive success while reducing dependence on high performers.

Support Systems: How do you measure, track and reward sales performance?

Information, performance measurement, goals and compensation form the backbone of any distribution system. In recent years, carriers have been working to update legacy systems and collect more information about their brokers and customers. Still, based on our study, it appears that use of this information by distribution organizations is spotty at best. And while most carriers invest in designing and tracking sales compensation, few pay close attention to the underlying metrics and measures that drive success.

It goes without saying that you can't solve your problems if you can't identify their causes. You can use the "Support Systems" checklist to see if your organization is on the right track as far as sales operations are concerned.

One of the most significant conclusions from the study is that the carriers who exhibited the best practices on these sales drivers realized substantially better results--including more sales per rep and better persistency rates. By bringing a little science to the art of distribution, these best-in-class carriers are able to meet broker and customer needs better and in doing so drive sales results. Yet even the top carriers cannot place all their check marks in the "best practices" columns--there is room for improvement in every distribution organization.

As we conducted our study, we learned that almost every carrier was on board with the latest strategies: the shift to voluntary sales, a renewed focus on college recruiting and the search for profitable broker and customer relationships. Few, however, had the execution focus necessary to translate these and other ideas into sales results. The checklists presented here are only a starting point--a high-level guide to best practices in "blocking and tackling" from a sales and marketing perspective. By working to measure and improve its performance on a continual basis, your distribution organization can make great strides toward building and sustaining success.
Distribution Fundamentals


 Market Strategic
 Knowledge Alignment People

* What are the * How does * What ap-
needs of your the knowledge proach to hir-
customers and translate into ing, training
brokers? What tailored strate- and manage-
opportunities gies and ment will drive
exist? offerings? the execution
 of strategies?


* How can
goals, com-
pensation and
drive success-
ful implemen-

Market Knowledge [check]

Common Practices

[] We have brokers based on how much business they have with us.

[] We have a sense for good customers based on size and industry code (SIC).

[] We conduct annual studies to measure customer and broker satisfaction.

[] Information from broker and/or customer studies is not regularly or uniformly used by the sales force.

Best Practices

[] We identify broker prospects based on sales potential and fit with our strategy.

[] We know who the good customers are and how best to acquire them through our reps and intermediaries.

[] We regularly measure the gaps between our offerings and broker and customer needs.

[] Our sales force believes in our market research and sees the value in acting upon it.

Strategic Alignment [check]

Coomon Practices

[] We work with our brokers to identify good customers for us.

[] We distinguish between broker segments through our broker compensation and awards programs.

[] Our sales reps know the good brokers in their territories; they determine how to allocate their time.

[] We are planning to add a few reps this year in high-potential markets,

Best Practices

[] We educate our brokers on why we are a good fit for certain customers, and why that is good for the broker.

[] We tailor all our offerings and sales process based on the requirements of each broker segment.

[] We provide direction--especially to our rookie reps--on where and how to invest time with brokers.

[] We determine our rep and office growth by projecting and optimizing ROI.

People [check]

Common Practices

[] We feel our best reps are natural-born salespeople. You can't the best sales processes. teach the sort of talent they have.

[] We say our managers are mentors, but we evaluate and pay them like senior sales reps.

[] We are tired of hiring everyone else's reps, but it's still the best approach.

[] Our hiring process is decentralized. There is little consistency in how potential new hires are evaluated.

Best Practices

[] We feel our best sales reps use the best sales processes. We teach their approaches in our training process.

[] We have clearly defined managers' roles. We tailor our office structure and compensation to support that role.

[] We have defined the skills and culture that are best suited for our sales force. We attract and hire reps based on their experience with our competitors.

Support Systems [check]

Common Practices

[] We establish sales goals for each rep based on tenure.

[] We evaluate our compensation plan each year only to make sure our costs are in line with industry standards.

[] We capture customer, broker, and bid information, but rarely make use of it from a sales perspective.

[] We report new sales and cancellations on a weekly basis. We often take action after seeing bad results.

Best Practices

[] We establish goals based on historical performance and market opportunity.

[] We evaluate our compensation plan each year to reinforce our strategy and align payouts with performance.

[] Our broker, customer, and bid information is integrated and made available to the sales force.

[] We report sales results and leading indicators via dynamic reports. We can often anticipate problems.

Key Points

* To achieve profit and growth, carriers need to identify the fundamentals that drive sales and work to achieve excellence in each area.

* Successful carriers study their brokers and customers and use the knowledge to support their sales and service efforts.

* Carriers need to focus more on how they sell.

* Carriers need to spend more time hiring reps and developing their talent.

Arun Shastri is a principal and Jason Brown is a manager at ZS Associates, a global sales and marketing consulting firm.
COPYRIGHT 2004 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2004, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Distribution
Comment:A test of strength: review the checklists and discover how to beef up group disability and life insurance sales results.(Distribution)
Author:Brown, Jason
Publication:Best's Review
Geographic Code:1USA
Date:Sep 1, 2004
Previous Article:A capital idea: ERC executive proposes a new method for pricing reinsurance.
Next Article:In the neighborhood: will small agencies go the way of mom-and-pop stores?

Related Articles
Woodmen Accident to Form Mutual Holding Company.
Profit Slide.
A Failure To Communicate: What employees and employers don't know about disability income insurance is hurting the market. (Life/Health).
Mining a rich vein: low market penetration offers insurers with conservative products and strict underwriting a chance for profit in individual...
10 ways to get into the game: individual disability-income products come in a variety of shapes and sizes, all of which can be profitable for...
Employee-benefits captives by the numbers.
Year-end health-care checklist.
New direction for disability: disability insurers are reaching out to the untapped lower-income and blue-collar sectors by educating them about the...
Mid-year LTD & STD sales premium growth rates.
On call: insurers are making some big--and enticing--changes to disability insurance for physicians, but there's still an untapped market in need of...

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters