Loyalty Gained is Loyalty Earned

The recent blog discussing Michael Diekmann’s public acknowledgement of serious problems at Allianz Life that needed to be fixed, generated some intense activity and numerous cogent comments. While all comments were germane (not German) to the topic, one raised a particularly logical question. The subject of the comment was “reciprocal commitment,” or in short, loyalty to and from the company and the agent. This issue goes to the core of the relationship between an insurance company and its distribution system and as such deserves more detailed attention.

It has always been my philosophy that if a company depends on independent (as opposed to captive) marketing companies and independent agents for the bulk of its business, then it is incumbent upon the company to earn the commitment (loyalty) of the distribution system, not the other way around.

Those who worked with me at ITT Life, LifeUSA and Allianz constantly heard the refrain, “The independent agent has a choice as to where they place their business and is under no obligation to send us their business; we have to earn it.” And, it was not just the first “app,” it was each and every one that had to be earned. From my perspective the independent marketing organization and the agents were the customers of the company (the policyholder was viewed as the customer of the agent) and like all customers who have a choice as to where they place their business, we as the company had to earn that business. And it was earned by providing value added, competitive products, and outstanding service along with respect and support for the very independence of the distribution system.

My viewpoint was that the only inherent obligation the independent marketing company or agent had to the company was to fully comply with the contract they had signed and that all sales be properly made. There was recognition by all in the home office that nothing in the contract mandated that the marketing organization or agent produce business for the company. This philosophy was so ingrained in the operation of the company that even after LifeUSA and later Allianz Life took partial ownership in a marketing organization, there was still no requirement that business be produced for the company. We still operated on the basis that business had to be earned.

In the comment posted in response to the latest blog, the individual wrote, “Senior management at Allianz has recently talked about “reciprocal commitment” whereby those IMOs who are 100% committed to Allianz will receive 100% commitment from Allianz but those who are not will receive commitment from Allianz proportionate to how much business they gave Allianz versus other insurance companies.”

I have no idea if this is accurate and can’t comment specifically regarding Allianz Life, but I have learned over the years that such a philosophy is consistent with the attitude of insurance company executives who are basically lifeless, bureaucratic managers. This attitude is especially prevalent among executives who have little experience dealing with independent agency distribution systems, i.e. Met Life and Prudential.

In dealing with executives of this ilk I found they exhibited the attitude, “We will make the dog food and the dogs will eat it – and like it” These executives felt the company was entitled to the commitment and loyalty of the distribution system. Why? Well, just because they were the company. There was always a thinly disguised notion that the company had all the answers and always knew what was best. While they would not admit it, the reality is that these executives spoke the phrase “independent agent,” but acted as if the agents were employees.

Operating with this viewpoint, changes were announced, not discussed. Products were developed in the vacuum of the home office, not with input from the distribution. Warm words of support for the distribution system were effusive, but the agent was the first to be thrown under the bus when trouble appeared on the horizon. If it was to the financial benefit of the company to violate the concept of the independent marketing organization system, then it was done because it could be. There was little thought of “reciprocal commitment” here. This is a philosophy with which I could not disagree more.

And the moral of the story is …

When dealing with independent agents, the management of a company has no right to operate as if they were entitled to the agent’s business. They must earn it. Just as all companies must earn the business from customers. The onus should be on the company to make the commitment to the independent distribution system in an effort to earn the “reciprocal commitment.” From my experience it is amazing how “reciprocal” the independent agent system is when it is earned. If the management of an insurance company does not want to make the effort to earn the commitment of the independent marketing company or holds commitment to the agent hostage to the amount of business produced, then it has no concept of the realities of the independent agent distribution system and will fail miserably.

Does this sound like any group of executives or companies we know?

One response to “Loyalty Gained is Loyalty Earned

  1. Here’s a really interesting “heard it through the grapevine” – I recently heard that all the Allianz Life wholly-owned FMOs were recently informed that their FMO contracts were being terminated by Avia. Since Aviva is currently
    the #1 seller of equity indexed annuities and finished 2008 several notches above Allianz Life
    in the fixed annuity sales rankings, this will more than likely put the
    independent agent and their FMOs in a really tough spot. The independent
    agents will all want to remain independent – especially in such challenging
    times. This means they will more than likely pick up an Aviva contract from
    another FMO as there is no way they will go without having access to their products – especially if they’ve sold them in the past. This is a huge deal for the wholly-owned Allianz Life FMOs, as they will no longer be able to give their top agents access to all the best products on the street. And if the new FMO that they contract with in order to get access to Aviva products treats them better (service, comp, trips, a commitment to treating them like a valued business partner, etc.) than their wholly-owned Allianz Life FMO is treating them guess who the agent will more than likely elect to get their Allianz Life products from in the future. And if AZLife decides not to allow FMOs who are not
    wholly-owned to sell their product – or if they decide to give these FMOs a level of support that is less than that provided to its wholly-owned FMOs, any FMO with I brain will consider Allianz Life to have shifted from independent distribution to captive distribution. This would be the ultimate insult to the FMOs and independent agents, as LifeUSA
    created the biggest, best and most powerful independent agent distribution model, “rescued” tons of agents
    and FMOs from the captive companies they despised doing business with and LifeUSA Marketing used to use the “where you are independent but not alone” slogan all the time.

    Hopefully the current slate of Allianz Life bureaucrats will have the ability to navigate these murky waters, as this one could become a ticking time bomb if not handled appropriately. And if they make the wrong move on the fixed side, the fact that their variable business is already in shambles won’t leave them with much else to sell.

    Hopefully they are able to “fix” this problem – or botch it up really badly – before Hartford is now longer on the blocks. If I were still an Allianz Life business partner I know I’d be cheering for “merging away” AZLife’s problems once again!

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