What will breathe new life into comatose life insurance sales in the bank channel? The hotly debated and much reviled fiduciary rule, said program managers and bank wealth management executives at the Industry Leadership Forum held recently in Orlando.
Life insurance will become more attractive to sell in the post-fiduciary world because it is one of the few products not encumbered by the rule and therefore not subject to the best interest contract exemption.
"The fiduciary rule and the pressure that it's putting on other investment products is a good catalyst to refocus on life insurance," said Scott Stathis, managing partner of research and consulting firm Stathis Partners, which organized the forum in partnership with Bank Investment Consultant.
To be sure, life insurance has long needed a catalyst to help ignite sales. The business line accounts for a mere 3% to 4% of investment services revenue at banks and credit unions. "It's a drop in the ocean," Stathis said, given that investment services revenue represents just 10% of overall bank and credit union revenue.
The sluggishness is attributed to a number of factors, said participants. Life insurance is a more complicated sale because of the uncomfortable questions it raises and takes much longer to land business compared to other products. The long underwriting and approval process also deprives advisers of the instant gratification they experience when making a sale, they noted.
"When you sell an annuity you get a commission upfront," Stathis said. "When you sell a life insurance policy, the client has to go through an approval process that can take weeks."
Even if the insurance policy goes through, commission is not paid upfront but rather "in trickles as premium is paid," Stathis added.
"It's too time-consuming," noted a participant at the forum, admitting that his institution had not put too much effort into selling life insurance.
The obstacles, however, are starting to come down as the approval process becomes more automated and less paper-based. Insurance companies are also trying to restructure compensation arrangements to make it more appealing to advisers.
Four Seasons Financial Group, a wholesale provider of insurance and investment products, for example, designed a new term life insurance product that pays advisers one lump-sum commission upfront.
"The insurance company fronts the money to the bank, so that it can pay the reps," said James Sorebo, president and CEO of Four Seasons Financial Group and a forum participant.
Making insurance even more palatable to sell is the fact that government would like to see the insurance industry sell more life insurance to the middle market, according to Stathis.
"The government has long considered the middle class under-insured and typically supports mid-market life sales, he said.
Banks and credit unions already have an ideal forum for introducing life insurance to customers through their platform reps, Stathis reminded participants. "Platform programs can be very good at initiating life sales," he said.
"If you're looking out for the client's best interests, it's the right thing to do since protection is one of the six basic financial needs," Stathis said, referring to the sale of life insurance.