Life Insurers Embrace Shift To Wealth Management
June 2024
Written by: Kathleen Krozel , LLIF, FLMI, ARP Research Director, Distribution Research LIMRA and LOMA
For the past 20 years, the business mix of life insurers with agency-building sales forces has been changing, with an increasing share of sales being generated by investment products. In recent years, that trend has accelerated. Life insurers are not only embracing, but actively growing the wealth management portion of their business. This article examines the trajectory of this trend, explores key drivers and considers the impact on the channel.
A Growing Trend
The productivity of financial professionals (FPs) in agency-building distribution can be measured in several ways, one of which is “first-year” commissions (FYCs). In LIMRA’s FP (Agent) Production and Retention study, FYCs are reported for broad product categories such as life insurance, annuities and investment products.
From that research, we saw a gradual shift in product mix in the 2000s, during which the share of FYCs coming from life and health products decreased from 65 percent to 54 percent, while investment products and annuities garnered a growing portion. Over the next decade, that trend accelerated; by 2021, the life insurance share of an FP’s FYCs had declined to 35 percent, while investment products ballooned from 19 percent to 50 percent.
Figure 1. Trend in the Distribution of FP Commissions by Product Line
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Filter the data in this chart by clicking on a color bar in the chart legend.
One might be tempted to conclude that several large insurers drove this change, but that is not necessarily the case. Of the 14 companies reporting production data for both 2011 and 2021, 10 had investment product sales. Each of these had a growing share of FYCs coming from investment products, with increases ranging from 13 to 37 percentage points. Clearly, the trend toward selling more wealth management products has taken a firm hold in the agency-building channel.
Drivers
What is driving this trend to wealth management? One of the key drivers is ...
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Founder & CEO - Pension Pakistan
5 个月Indeed, this observation holds true across different regions. In the US and Europe, the adoption of life insurance as a strategic financial tool has gained significant momentum in recent years. However, in the Asian subcontinent, this practice has been prevalent for decades. Traditionally, insurance policies in these regions often feature low coverage with a strong emphasis on savings with few supplementary benefits. The primary focus has been on the investment aspect, leading policyholders to commonly ask, "How much will I get on maturity?" This reflects a cultural inclination towards securing future financial returns rather than solely seeking protection. Understanding these regional differences can help in tailoring insurance products and strategies to meet diverse consumer expectations and needs effectively.
Managing Director, CEO & Executive Consultant @ Jennings Consulting Ltd | ACS, FLMI, HIA, CFSB, FLHC | Helping clients solve complex challenges and capture opportunities.
5 个月Jim Ruta FDFS - I bet you have some perspectives on this research!!
Living with with Younger-Onset Alzheimer's and advocate for all people living with dementia.
5 个月Great article Kathy!