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Producer-owned companies have something to offer both agents and insurers, according to executives at these companies. These firms develop proprietary software for their members, sponsor study groups and other educational and management development opportunities and negotiate with insurance companies for exclusive products or special pricing.
In return, insurance companies get easier access to high-producing agents and some premium guarantees as well as lower distribution costs.
The independent agents, in their turn, have simpler access to products from a variety of companies, with their commission structure based on pooled sales.
It is, according to an executive at one of these umbrella companies, "a win-win-win situation."
The top umbrella companies, such as the largest, M Financial Group, Portland, Ore., as well as other major players including the Partners Group, Austin, Texas; the Hemisphere Group, Cambridge, Mass.; and Forth Financial Resources, a sister company of Life of Virginia, Richmond, Va., launched their producer-owned formats in the mid-1980s.
The trigger for the formation of these companies, notes Gary J. Fegley, senior vice president, the Partners Group, was the product revolution in life insurance in the 1970s that made it easier for producers to become independent, coupled with later demands for greater market share by insurance companies.
"We got started because we could offer producers the ability to remain independent, but at the same time create additional income, profits and a chance to build equity," he says.
"A single insurance company cannot meet all the needs of high producer," adds Thomas N. Spitzer, senior marketing officer, M Financial.
These executives expect continued growth in this form of life insurance distribution, with insurance company career agent systems increasingly confined to a middle-income market.
"I feel that most of the top independent producers have either joined one of the marketing groups or are thinking actively about it." comments Fegley.
"The wave of the future is alternative distribution systems, and this is one of them," notes James C. Fantony, vice president, marketing, the Hemisphere Group. "It offers a way for insurance companies to cut agent expenses, and a number of insurance companies are looking at alternative distribution. We share the risk and do the work. We get extra compensation; the insurance company gets reduced expenses."
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