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Reaching the top: US life insurers find a key to wealthy clients in the brokerage channel.

U.S. life insurance companies seeking an effective way to sell policies to wealthy individuals, families and business owners are increasingly turning to brokerage general agencies.

The affluent space is dominated by BGAs because they have the expertise to handle complex case issues, said Dennis H. Roberts of Zurich Financial Services Group.

For example, the amount of coverage that a wealthy family or individual can get has declined over the past decade as life insurers and reinsurers have merged, tightened their belts, reduced their exposures or exited the business, said Roberts, who heads Zurich's North American independent financial adviser affluent life group.

One company can't offer $100 million in life insurance protection so a client must stack layers of coverage and might do so through five different insurers, he said, noting that's where the BGAs can help.

BGAs represent multiple life insurers and offer independent agents a one-stop shop for life insurance, annuities and retirement planning. Among the well-known BGAs that market their services to the wealthy are M Financial, Crump Group, National Financial Partners and Ash Brokerage.

There are varying definitions of high net worth, but some define it as an individual with $1 million or more in investable assets.

Then there's the super-rich. Michael Amoia, vice president of advanced sales of Crump Life Insurance Services, said he often works with millionaires and billionaires and it's "amazing" how similar the discussions are. "The issues just have different zeros."

A Big Change

The BGA channel represents a major shift in distribution. About 20 years ago, life insurance companies with career agents dominated the affluent market. The industry has since morphed from career to independent agents selling through BGAs. Life insurers find it appealing because it relieves them of the costs associated with employee sales representatives, Roberts said.


Zurich is bringing additional "per life retention" or capacity to the affluent market. Late last year, Zurich said it would return to the U.S. life insurance market catering to the affluent market through independent distributors. It's targeting about 1,000 independent producers through a limited number of brokerage general agencies who focus on the affluent, said Roberts.

There's "fierce competition for business" from high net worth individuals, said Judith Alexander, director of sales and marketing for Beacon Research, a firm that tracks sales of annuities. Banks have or are setting up special departments to serve them, she said.

No single distribution channel "has an inherent sustainable advantage through all economic cycles," said Lucian Lombardi, vice president of distribution research at LIMRA, in an e-mail. Recent trends are pointing toward interest in recruiting new talent from professionals who already count the affluent among their clientele including registered investment advisers, estate attorneys, CPAs and benefit consultants, Lombardi said.

Independent agents get their fair share of this market because it's often necessary to "bid out" cases to get the most favorable rates, said Jeremy Alexander, chief executive officer of Beacon Research. The consumer is typically a business owner who's trying to pass on that legacy to heirs and keep the business intact, said Alexander, who previously sold life insurance to high net worth clients.

"These business owners often have health problems and need to find a carrier that handles these types of risks in a cost-effective manner," said Alexander, a former member of the Million Dollar Round Table.

Generally, life insurers pay a BGA a commission for its wholesaling activities and pay the writing agent who actually sells the policy a retail commission, Roberts said.

Planning for clients continues to be complicated because of changes in tax laws, a volatile stock market, instability with real estate, and other variables based on a client's individual situation, Amoia said.

Amoia said the independent agent "drives the client relationship" but Crump helps them "bridge the gap on the back side."

For example, in the historically common captive agent carrier relationships, carriers supported agents with information on underwriting, sales ideas, technical support and client servicing, Amoia said. But the trend toward agent independence "has left a void for many agents."

Crump offers a support system to help agents, often leveraging the support of its partnerships with carriers, he said. The firm has an advanced sales group with lawyers, CLUs, ChFCs and CFPs.

Phil Harriman, a partner at Lebel and Harriman, an independent investment and insurance firm that's a member of ValMark Securities, said he's associated with ValMark, a broker-dealer that's also a BGA, because it provides access to about 20 life insurers.

Amoia noted people often think the federal estate tax drives life insurance sales but life insurance is more than about paying the taxes. Wealthy people are starting to buy it simply because they're realizing it's "a sound asset," especially since the financial crisis, he said.

Greg Womack, president of Womack Investment Advisers/ Womack Wealth Management, said the estate tax rate recently went down but estate-tax planning will always be around for the wealthy. "They are too big of a target not to be in the cross hairs of the government longer term."

High-Profile Brokerage General Agencies

These firms are often mentioned as intermediaries that serve the wealth management needs of the affluent.

Ash Brokerage

President and Chief Executive Officer: Tim Ash

Headquarters: Fort Wayne, Ind.

Organizational Structure: Privately owned and family operated with 18 sales offices, staff of more than 300 employees including 18 underwriters and a medical director.

Carrier Partnerships: Represents more than 80 insurance companies offering life insurance, long-term care, disability income, annuities and advanced markets.


Crump Group

President and Chief Executive Officer: John Howard

Headquarters: Roseland, N.J.

Organizational Structure: Wholesale insurance distributor

Employees: 3,000 associates in more than 60 offices.

Carrier Partnerships: Relationships with more than 100 carriers offering life insurance, annuities, long-term care and disability.


M Financial Group

President & Chief Executive Officer: Fred H. Jonske

Headquarters: Portland, Ore.

Organizational Structure: Member-owned holding company

Producers: Exclusive network of more than 125 financial services firms in 36 states and Canada and more than 600 producers and 200 team members.

Carrier Partnerships: Works with select life insurers and investment firms to develop custom products.


National Financial Partners Corp.

Chairman, President and Chief Executive Officer: Jessica M, Bibliowicz

Headquarters: New York

Organizational Structure: Network of independent financial advisers consisting of owned and member firms in the United States, Puerto Rico and Canada.

Products: Wealth management advisory services to individuals, broker-dealer and asset management products and services to independent financial advisers; and corporate and executive benefits, retirement plans and property/casualty insurance.


Key Points

* What Happened: The amount of life insurance coverage for wealthy consumers has declined over the past decade as life insurers and reinsurers have merged or reduced their exposures.

* What It Means: One life insurer can't offer $100 million in coverage, so a client may have to go with five different companies to layer coverage.

* The Trend: The life insurance industry has morphed from career to independent agents selling through brokerage general agencies to help with complex case issues.
Defining Tiers of Wealth Wealth

Breakdown of the life insurance market by investment-wealth tiers,
based on 2009 estimates.

                                          Average       Assets of
              Investable     Number of    Financial     Tier ($
Name of Tier  Asset Range    Households   Assets        billions)

Ultra-high-          >$20m        45,885  $44,481,373       $2,041
High-wealth     >$10m-$20m       125,531  $13,653,430       $1,714
Wealth           >$5m-$10m       373,204   $6,991,302       $2,609
Affluent          >$2m-$5m     1,408,715   $3,118,675       $4,393
Mass-           >$500K-$2m     6,845,210     $907,008       $6,209
Middle        >$100K-$500K    23,761,978     $226,727       $5,387
Mass market         <$100K    84,620,154      $19,999       $1,692

Sources: Cerulli Associates; Federal Reserve, Current Population Survey
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Title Annotation:Life: Distriburtion
Author:Lysiak, Fran Matso
Publication:Best's Review
Geographic Code:1USA
Date:Feb 1, 2011
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