The life insurance industry needs to reconsider the role that insurance agents play as consumers demand new channels of customer service, according to industry experts who spoke at the LIMRA and LOMA Canada Annual Conference in Toronto on Tuesday.
Although financial advisors continue to play an important role in the distribution of life insurance, clients are expecting alternative ways of researching and buying insurance as well as interacting with insurers, said Sean O’Donnell, vice president of member relations and consulting with Windsor, Conn.-based global insurance association LIMRA, during a discussion.
“[Clients] are saying, ‘I want to do business the way that I want to do business’,” O’Donnell said. “More and more, customers want a blend. They don’t want a fully self-directed experience and they also don’t want a fully advisor-led experience. They want the ability to float back and forth.”
As a result, the insurance industry must invest in new channels for engaging clients, such as facilitating more online functionality, rather than relying exclusively on insurance agents to maintain those relationships, O’Donnell said.
This means shifting away from the insurance industry’s traditional approach of treating advisors as end customers and instead treating them as distribution partners, while fostering closer connections with clients themselves.
“[Insurance companies] are not abandoning the advisor or the seller in favour of the consumer,” O’Donnell said. “There is always going to be financial advisors, but their role is certainly shifting. We have to understand the role that they play.”
A key factor that has impacted the role advisors play is the plethora of information available to consumers online, he added: “Today, there is information parity. As the consumer, I have access to as much — if not more — information than the advisor does. So, it changes the dynamic of our relationship.”
However, consumers need help understanding all of that information, according to Patrick Leary, corporate vice president of distribution research at LIMRA. He said recent study groups conducted by LIMRA revealed a concerning lack of financial literacy among Canadian and U.S. consumers.
“We heard from our groups that outside of the basics, they really lack financial literacy,” Leary said. “They can research on their own, but they really need help understanding it.”
Thus, advisors must adjust to this new reality, he said, by helping clients wade through all of that information and understand how financial concepts and products apply to their own circumstances.
“It’s a changed relationship between clients and advisors,” Leary said. “There’s a new role for advisors. They really have to raise the game, and help [clients] meet their needs.”
These shifts in distribution will be a major disruption for the insurance industry, O’Donnell said, adding that it must embrace change in order to keep up with changing customer expectations.
“We have to overcome inertia. We have to overcome almost 200 years of industry practice,” he said. “We’re going to have to become more nimble, more agile.”
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