Four reasons P&C carriers can win with wealth management

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In our last post, we discussed how a compression failure jeopardizes profits and margins for P&C operators. We also looked at why we now see recommendation-based money management as an attractive market for carriers. In this post, we will explain why we believe P&C carriers and agents are uniquely positioned to play in this market.

First, let’s remind ourselves what this market is. Historically low interest rates and new distribution entrants are pushing carriers into the high and low margin segments of the financial services value chain. From a strategic perspective, the move to advisory and asset management offers carriers and agents a potential lifeline in a vicious circle of compression. It can also provide a path to growth and improve customer retention as well as overall brand loyalty through increased wallet share.

Based on changing customer expectations and the existing reputation of carriers and P&C agents, we believe they have an advantage over the competition if they are flexible enough to exploit it.

Let’s look at four reasons why P&C carriers and their agents are uniquely positioned to access and thrive in the advisory and asset management markets.

1. Client expectations are shifting towards comprehensive financial advice

Consumers are increasingly turning to trusted advisors to provide services that span the full range of financial products. recent Consumer Asset Management Survey found a broad and pronounced demand for holistic offerings. More than half of all respondents (56%) want a comprehensive asset management offering that includes advice, risk protection and lending. In addition, 79% of investors, including 85% of Gen Xers and 91% of millennial investors, expect their advisor to offer both banking and insurance products.

Despite this thirst for advice, many consumers are skeptical about the value of the advice they currently receive. According to the same consumer survey conducted by Wealth Management, 55% find the advice they receive is too general. The same part (55%) also believes that they could better invest on their own, making decisions that bring higher returns minus fees.

As consumers increasingly seek financial advice that looks at their financial situation in general and makes specific recommendations, the likelihood of finding a new source of advice or abandoning their current source of advice is likely to increase. In fact, nearly one in five of our survey respondents changed consultants in the past year. This gives insurers the ability to combine risk solutions and move into or partner with neighboring industries to meet the full range of client advisory and asset management needs.

2. Carriers and P&C agents maintain ongoing relationships with their customers.

Insurers and their agents remain among the most reliable financial institutions. Latest Accenture Global Banking Consumer Survey found that 24% of consumers say they trust their insurance company “a lot” about their long-term financial well-being. If that doesn’t sound like much, consider that only 8% said the same about retailers. Similarly, 32% of consumers said they “very trust” their insurance company to protect their data, compared to 21% for online payment companies and 7% for social media. In addition, customers are willing to provide additional information and personal data to insurers and their agents if there is a perceived benefit in doing so.

Add to this that insurers are already used to frequent heart-to-heart conversations with their customers. On average, an auto policy is renewed 13 times, while a home policy is renewed seven times. This creates many points of contact between agents and their clients as they consider coverage and negotiate options, giving the agent unique opportunities to offer value-added services such as asset management. A similar level of engagement is expected in advisory and asset management, with nearly four in ten respondents in our consumer asset management survey saying they would like to hear more from their advisor. The relationship between policyholders and policyholders remains unique in the financial services industry, and carriers that yesterday went above and beyond for their customers may tomorrow discuss asset management issues with those customers.

P&C carriers and agents also have unique access to an underserved financial advisory market. Since net worth (and assets that can be invested) increases with age, financial advisors tend to work with older demographics. However, P&C carriers and agents work with both equity and age spectrum as they provide personal insurance for America as a whole. The relationships this creates naturally open doors to money management opportunities in today’s underserved markets. This gives carriers the opportunity to benefit from largest intergenerational transfer of wealth in historyunlike their fellow financial advisors, who will first have to establish relationships with younger clients.

3. P&C agents have a lot in common with financial advisors.

From geographic presence to the sale of regulated products, P&C agents and financial advisors have more in common than might seem obvious at first glance.

Let’s start with the geographic footprint. Both financial advisors and insurance agents position themselves as “locals”. Due to the nature of both exclusive agent channels and independent agent channels, these agents already exist in virtually every city in America. P&C carriers do not need to create a local presence as they already have one.

These agents are also used to sell regulated products. For those carriers and P&C agents that also sell life insurance and annuities, the distinction is almost non-existent due to “best interests” and policy illustration rules. Of course, P&C carriers will need additional management and agents will need additional licenses. But the jump is not as far as one might imagine. In fact, there are many organizations that believe that at some point in the future, agents will need to obtain securities licenses in order to sell fixed index or stock index annuities. Some are lobbying for this change.

4. Many insurers and agents have already taken small steps along this path.

Finally, many P&C carriers with exclusive agents have already begun offering asset management products. Carriers such as Farmers, Allstate, Country Companies and many Farm Bureau insurers already have limited liability brokers/dealers that allow them and their agents to sell mutual funds either as part of an insurance product or as a standalone investment to their customers. . We know about one FBL financial group, which has created a registered investment advisor and offers a full range of investment advice and paid asset management. This service has been embraced by both its agents and clients.

A unique opportunity at a unique moment

Thus, P&C operators have a significant opportunity to capitalize on today’s market growth and create a new revenue stream with fewer assets. Changing client expectations towards holistic financial advice, combined with strong, unique client relationships in the industry and a proven ability to sell complex regulated products, create a unique path to growth. While some P&C carriers have been successful in this, we believe the biggest results are yet to come. By creating or expanding a comprehensive set of capabilities, P&C operators can truly win in this market.

In the next blog in this series, we will look at the strategic principles and capabilities required to take advantage of this opportunity.

In the meantime, if you’d like to discuss diversifying your offerings to include money management tips, we’d love to hear from you. You can find Scott Stice AND Bob Besio.

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