There is something for everybody — old hands, raw recruits, management and shareholders — in the variety of distribution models employed in the insurance industry.

Of the companies surveyed in Investment Executive‘s 2004 Insurance Advisors’ Report Card, Clarica Financial Services Inc., State Farm Canada, Freedom 55 Financial and The Co-operators Group Ltd. all use variations of the captive/career agent model. Great-West Life Assurance Co. uses a brokerage structure. And in what may be the most interesting development to date, Equinox Financial Group Inc. has fashioned itself as a “super MGA,” placing it above regional managing general agents.

Essentially, distributors are picking and
choosing features of the old systems to create a distribution environment friendly to the current industry landscape while keeping costs of distribution under control.
Some companies are having more success then others.

Both Clarica and Freedom 55 are mitigating the cost of their sales forces by drawing on certain aspects of independent models. In fact, managers of both companies balk at the idea of calling their sales forces “captive.” They prefer the term “exclusive.”

“A captive agency force really means that advisors are hired only to sell proprietary products. An exclusive distribution channel represents not only the proprietary products of the manufacturer but it also represents products of intercorporate manufacturers secured through arrangements with the principle manufacturers,” explains Nick Pszeniczny, senior vice president of Freedom 55 in London, Ont.

In order to compete with the virtually unlimited product shelf of independent insurance advisors, these insurers have made the products of their sister companies available to their sales forces. A Freedom 55 agent, for example, can sell London Life Insurance Co. products as well as the various products under the Great-West Life umbrella.

“[An advisor] is eligible to sell products not only manufactured from a proprietary point of view by London Life, but we also sell products of Canada Life Assurance Co., Sun Life Assurance Co. [of Canada], Manulife Financial Corp., Great-West Life and our other intercorporate relationships,” Pszeniczny says.

Clarica agents can also sell Sun Life products as well as “portal products,” in which the shelves are expanded further through intercorporate agreements.
Neither State Farm nor The Co-operators shy away from calling their sales forces “captive” but they, too, sell products other than proprietary ones. Jim Wingrove, director of agency at The Co-operators in Guelph, Ont., describes his firm’s advisors as “captive, self-employed, exclusive agents.
[They are] captive to us because they can only sell our core product line for certain products we manufacture. But they also have access to other products we don’t manufacture.”

The Co-operators uses the Federated Agencies Ltd. brokerage in Markham, Ont., for products it does not supply. Federated works with Investia Financial Services Inc. to make mutual funds available to Co-operators agents. Likewise, though intercorporate agreements, State Farm agents sell UnumProvident Corp./
RBC Insurance
critical illness and disability insurance, as well as State Farm life and investment products.

In another creative twist on the independent channel, many exclusive agents do own their client lists. Traditionally, captive agents do not have complete control over their books and, if they leave their company, their clients revert to the company to be redistributed to fellow agents. As the channel has evolved, however, they have gained control of their books — but they are obligated to sell them to the company when they leave the company or retire. These are key features of Clarica and Freedom 55.
Agents leaving those firms have to sign non-competition clauses but have guaranteed buyers for their clients, so they do not leave empty-handed.

State Farm is perhaps the lone holdout on this front. According to Bob Cooke, State Farm’s Toronto-based senior vice president and CEO of the Canadian operation: “Our agents sign a contract with us, which says they will be State Farm agents, and it clearly outlines that anyone they deal with is a State Farm client, as opposed to their individual client.”

In order to cut administrative costs companies are taking another page from the independent book. Along with owning their books, advisors at Clarica, Freedom 55 and The Co-operators are getting a lot more control over their businesses. Like independents, they are getting higher compensation in return for shouldering more responsibility for expenses such as office costs and administrative help.

Of course, not everyone is pleased with the downloading of costs. “Why do we have managers if we’re running our own businesses?’ asks a Freedom 55 agent.