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There are some trends in the life insurance industry that occasionally make me wonder if we are glimpsing the future of the business, or are we already there? If life insurance companies could figure out how to get as much business without the use of commission paid agents there isn’t any doubt that improve their bottom line. Not by a lot as agents are paid, for instance, on term life insurance for just the first year, but any expense cut in the minds of some companies is money in their pocket. I find the supposition flawed and not just because I want to protect my job. They don’t factor in the value added with an agent when it comes to retaining and servicing business. They don’t factor in the field underwriting a good agent does that saves the company time and money

With my entire agency built around servicing impaired risk life insurance clients I don’t foresee being caught up in a first wave of  dumping life insurance agents for home office based semi automatic systems. The first to go would be those whose focus is on writing large numbers of the young and healthy. I don’t think there is any coincidence that American General was the first life insurance company to start and widely publicize it’s solely owned on line mega agency, Matrix Direct. While there is still an expense of doing business with the infrastructure of Matrix, if they are following the models of other mega agencies like Eterm.com or Selectquote or Zander Insurance, the cost is far less than the commission that they would pay independent agents.

My colleagues and I have wondered for years if there would come a time when companies would completely bag the agent system and make a move to an even more closed system that what we’ve seen with Matrix and AIG. Another rung in that ladder seems to have put in place with AIG’s move to use the CRL lab Smart Score underwriting methodology. Especially in the young and healthy this new underwriting addition could (in theory) simplify the application and underwriting process. It would still require an exam, but this methodology could well replace the need for the pre application interview being done in person. It would be a simple move to automate the interview and base the final underwriting on the automated answers and Smart score. No more agents or underwriters on at least the simpler policies which likely comprises at least 75% of their total annual sales.

So here’s the big picture. We have American General with Matrix Direct and Smart Score. We have any number of companies that have pushed the agent out of the picture by demanding we use their version of a quick app system. We turn over all responsibility for asking questions, setting exams and delivering policies which I can tell you from several bad experiences doesn’t work well a lot of the time and rarely works with impaired risk cases. Some companies have forced the issue of whether we have to use it be simply saying if we don’t, if we run the application through our own system and office, we won’t be paid.

So who benefits from programs like App Assist, Smart Score and companies having their own mega agencies? The companies are the only positive recipient by using the various systems and in the short run the client won’t receive better rates. In the long run taking the agent out of the system means they won’t have the customer service they deserve. And just in case you have decided I’m just having a little whine with my post, these changes are likely to be far more damaging to giant mega agencies in the long run. If you have any questions or don’t feel like you’ve gotten a fair shake by some automated or semi automated system, call or email me directly. My name is Ed Hinerman. Let’s talk.