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MacDonald Claims Carrier Actions Threaten the IMO System
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really.....
Bob MacDonald, former CEO of Allianz Life, on Monday charged executives of some of the nation's largest life insurance companies with taking unwitting, self-destructive actions that could virtually destroy the industry's system of independent marketing organizations and threaten the future of the industry itself. Writing in his blog, www.bobmaconbusiness.com, MacDonald claims these insurance executives seem determined to eliminate any semblance of integrity, cohesiveness and coherency in the independent agent distribution system. If this trend continues, he says, any resemblance to an organized, stable agent distribution system and, ultimately, the very existence of the insurance industry itself will be in doubt.
"Life insurance and annuities are products that must be sold; they are not bought," MacDonald says. "Because agents must be recruited, trained and supervised to perform this function, the insurance industry is making a shambles of that simple paradigm."
MacDonald points out that for over a century, the sale of insurance policies was achieved by a system of captive agents. In exchange for company support and training, agents were contractually required to write business for only one company. There was, for the most part, no concept of an “independent agent."
Then, in an effort to reduce expenses, MacDonald says, most insurance companies abandoned the concept of captive agents about 25 years ago. This action gave rise to the independent marketing organization (IMO) that stepped in to assume the role of recruiting, training and supervising agents. MacDonald argues this system has worked well for the consumer, companies and agents.
"However, over the past few years, insurance company executives, more interested in short-term results than in long-term stability and lacking an understanding of the nuances of the IMO system, have allowed or even encouraged the decay and elimination of the fundamental precepts of this successful system," MacDonald says.
He continues that agents are now given nearly free rein to move from IMO to IMO, with little or no discipline regarding compensation levels. Agents can be enticed to move solely by the lure of higher commissions. The result, he says, is that the IMO and independent agent system has become a Wild West — a lawless, free-for-all that can lead to disastrous results for all concerned: the insurance companies, IMOs, agents and even the consumer.
"The dolts running the insurance companies don't seem to have enough sense or integrity to recognize the problem," he says. "They see their company paying the same level of compensation as always and care little as to how it is disbursed. They are blind to the fact that their complicity in this free-for-all could lead to the destruction of the very distribution system they depend upon for their own survival."
With IMOs now forced to compete for agents based only on commission levels, MacDonald says they have witnessed their profit margins shrink, and even disappear. When an agent can easily move from one IMO to another, drawn only by higher commissions, the IMOs know there is little chance to receive a return on any investment in the agent. Accordingly, says MacDonald, there is less capital available and little incentive to properly train, support and supervise the agents, who are left to fend for themselves. He adds that this problem is compounded when previously independent marketing organizations are now owned or controlled by a company. These "captive" marketing organizations compete directly with independent organizations and, with company capital and backing, have the ability to offer even higher compensation.
"If this laissez-faire approach to the independent agent distribution system is allowed to continue, it will ultimately lead to the elimination of the IMO and the destruction of the independent agent system itself," MacDonald says. "The irony here is that ultimately the insurance companies will end up dealing directly with the agents, at a cost that is greater than that of a captive system, with few of its benefits."
Bob MacDonald was formerly CEO of ITT Life, wholly owned by The Hartford. He founded LifeUSA, which he sold to Allianz SE in 1999 for $540 million and became CEO of Allianz Life of North America. Since 2002 MacDonald has headed CTW Consulting, a vehicle for offering his experience and unique approach to management and corporate culture development.
More Life Insurance Selling articles on IMOs:
Bob MacDonald, former CEO of Allianz Life, on Monday charged executives of some of the nation's largest life insurance companies with taking unwitting, self-destructive actions that could virtually destroy the industry's system of independent marketing organizations and threaten the future of the industry itself. Writing in his blog, www.bobmaconbusiness.com, MacDonald claims these insurance executives seem determined to eliminate any semblance of integrity, cohesiveness and coherency in the independent agent distribution system. If this trend continues, he says, any resemblance to an organized, stable agent distribution system and, ultimately, the very existence of the insurance industry itself will be in doubt.
"Life insurance and annuities are products that must be sold; they are not bought," MacDonald says. "Because agents must be recruited, trained and supervised to perform this function, the insurance industry is making a shambles of that simple paradigm."
MacDonald points out that for over a century, the sale of insurance policies was achieved by a system of captive agents. In exchange for company support and training, agents were contractually required to write business for only one company. There was, for the most part, no concept of an “independent agent."
Then, in an effort to reduce expenses, MacDonald says, most insurance companies abandoned the concept of captive agents about 25 years ago. This action gave rise to the independent marketing organization (IMO) that stepped in to assume the role of recruiting, training and supervising agents. MacDonald argues this system has worked well for the consumer, companies and agents.
"However, over the past few years, insurance company executives, more interested in short-term results than in long-term stability and lacking an understanding of the nuances of the IMO system, have allowed or even encouraged the decay and elimination of the fundamental precepts of this successful system," MacDonald says.
He continues that agents are now given nearly free rein to move from IMO to IMO, with little or no discipline regarding compensation levels. Agents can be enticed to move solely by the lure of higher commissions. The result, he says, is that the IMO and independent agent system has become a Wild West — a lawless, free-for-all that can lead to disastrous results for all concerned: the insurance companies, IMOs, agents and even the consumer.
"The dolts running the insurance companies don't seem to have enough sense or integrity to recognize the problem," he says. "They see their company paying the same level of compensation as always and care little as to how it is disbursed. They are blind to the fact that their complicity in this free-for-all could lead to the destruction of the very distribution system they depend upon for their own survival."
With IMOs now forced to compete for agents based only on commission levels, MacDonald says they have witnessed their profit margins shrink, and even disappear. When an agent can easily move from one IMO to another, drawn only by higher commissions, the IMOs know there is little chance to receive a return on any investment in the agent. Accordingly, says MacDonald, there is less capital available and little incentive to properly train, support and supervise the agents, who are left to fend for themselves. He adds that this problem is compounded when previously independent marketing organizations are now owned or controlled by a company. These "captive" marketing organizations compete directly with independent organizations and, with company capital and backing, have the ability to offer even higher compensation.
"If this laissez-faire approach to the independent agent distribution system is allowed to continue, it will ultimately lead to the elimination of the IMO and the destruction of the independent agent system itself," MacDonald says. "The irony here is that ultimately the insurance companies will end up dealing directly with the agents, at a cost that is greater than that of a captive system, with few of its benefits."
Bob MacDonald was formerly CEO of ITT Life, wholly owned by The Hartford. He founded LifeUSA, which he sold to Allianz SE in 1999 for $540 million and became CEO of Allianz Life of North America. Since 2002 MacDonald has headed CTW Consulting, a vehicle for offering his experience and unique approach to management and corporate culture development.
More Life Insurance Selling articles on IMOs:
- 24,930
"" When an agent can easily move from one IMO to another, drawn only by higher commissions, the IMOs know there is little chance to receive a return on any investment in the agent.""
As opposed to Serfdom or being endenchered (sp). Why not compete for agents.
I do not need much in the way of service or case management. I do not see what an IMO does anyway. I have one GA that I take a hair cut to work with. For maybe a half dozen companies. However, I call he answers or gets right back to me. I need an answer he gets it. Some reason I need a form or an illustration he runs it and emails it to me. Alan is the Answer Lady. The upline IMOs are of no value to me. At least none that I see.
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The same could be said that these new agents are killing the agent system. They keep trying to do less and less work. One day, the insurance company will no longer need insurance agents.
I hear everyday how they want a website that will do everything from quote the client to where they can buy it and do everything without ever having to talk to the client.
One reason why companies use IMO's is because we absorb most of these debit balances. They also rather just deal with 50 IMOS than 25,000 agents. It is like having generals in the Army.
I can agree with some of what he is saying. 10 years ago, most of use didnt have a 100% contract when it comes to life insurance. I thought having a 85% contract with Conseco was really great. We had to earn a higher contract.
Today, everyone can get over 100% with just about any company.
IMO are making less and less every year. We have to give out higher contracts and also pay off these debit balances.
I just had 1 agents stick me with a 18k debit balance. With all of the old agents dying off, we are just left with brand new agents that end up with hugh debit balances.
The way these new agents are changing things, sooner or later the insurance companies will try and cut us agents out of the middle.
This reminds me of Progressive Car Ins Company. They figured out a way to cut the agents out of the middle. Most people just go direct to the website and save 20% vs using an agent.
I hear everyday how they want a website that will do everything from quote the client to where they can buy it and do everything without ever having to talk to the client.
One reason why companies use IMO's is because we absorb most of these debit balances. They also rather just deal with 50 IMOS than 25,000 agents. It is like having generals in the Army.
I can agree with some of what he is saying. 10 years ago, most of use didnt have a 100% contract when it comes to life insurance. I thought having a 85% contract with Conseco was really great. We had to earn a higher contract.
Today, everyone can get over 100% with just about any company.
IMO are making less and less every year. We have to give out higher contracts and also pay off these debit balances.
I just had 1 agents stick me with a 18k debit balance. With all of the old agents dying off, we are just left with brand new agents that end up with hugh debit balances.
The way these new agents are changing things, sooner or later the insurance companies will try and cut us agents out of the middle.
This reminds me of Progressive Car Ins Company. They figured out a way to cut the agents out of the middle. Most people just go direct to the website and save 20% vs using an agent.
- 24,930
I hear what you are saying Mark.
However, there is a gap between a new agent that needs a lot of hand holding and some one that has been in this a while and does his own case management, does his own quotes, orders his own supples. Once in a while, I need/want a short cut to a solution. But I can just ask someone. Much Like our conversation on SPWL. Thanks, by the way.
However, there is a gap between a new agent that needs a lot of hand holding and some one that has been in this a while and does his own case management, does his own quotes, orders his own supples. Once in a while, I need/want a short cut to a solution. But I can just ask someone. Much Like our conversation on SPWL. Thanks, by the way.
I agree with you. The agents that know what they are doing and don't need any hand holding deserve the higher level contracts. An agent that just got his lic should not been given the same % that you would get.
You deserve the high end contract level and dont require much support.
The problem is that if you dont offer them advancing, another imo will.
Only I say 1 out of 40 agents contracted wants as earn only.
The older agents want it, but most of these new agents can survive this way.
- 1,896
Yes, but Progressive clients find out that they should have consulted an agent AFTER they have an accident and learn that "naming your own price" wasn't a good idea to begin with. In life insurance, most people don't have that luxury - once they die they don't revisit their coverage to see if they had enough.
Insurance companies will keep waxing and waning about the value of having live agents out selling their products, always thinking the grass is greener. It will always be cyclical, we just have to deal with it as agents.
Mark is right-a roll-up18k debit balance from one bad agent hurts the bottom line.He is co-signing for someone with no track record as a IMO.It takes many over-rides to recover 18K.I would rather just sell my own at this point.I trust what I did or said with a client;you never know with a agent under you.Mark earns his over-rides and is not lazy.He still sells personally .The present IMO system may not be perfect ,but it's much better then the new commie government system.
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