According to a recent report, insurers will be more likely to choose the insurance broker-dealer channel to sell life insurance and annuities instead of the independent agent channel in the next two years.The report, entitled “Life and Annuities: Shifting to Direct-to-Consumer Channels,” suggests that strict regulation has taken its toll on independent commission-based insurance agents, who once dominated as the most popular avenue for insurance product sales.
The shift from independent agents to broker-dealers “could make the broker segment the most popular agent type, beating out the independent agent,” said Aite Group consultant Samantha Chow, who authored the report.
Chow’s report surveyed 18 life and annuity insurance companies. She found that all the companies used five different channels to sell life and annuity products: independent agents, broker-dealers, investment advisors, career or captive agents and multi-line exclusive agents.
Initially, half of the insurers said that they offer the independent agent channel for distribution, with the other half saying that they use an insurance broker-dealer for distribution. In two years, however, roughly 61% of the companies reported that they intend to use the insurance broker-dealer for distribution.
“People are expanding into the broker channel,” Chow observed.
Chow then cited the U.S. Department of Labor new fiduciary rules, which raised investment advice standards for the sale of financial services products into retirement accounts. The rules were widely viewed as troublesome for independent insurance agents.
The first clauses of the rule come into effect Apr. 10, but industry experts are anticipating some distributors meeting compliance by the end of the year to coincide with the renewal of insurance policies.
Life and annuity insurers collected $138 billion in life insurance premiums and $361 billion in annuity premiums in 2014
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