The future for IMOs is bright, but only if they are willing to step up and control it
Last week’s blog suggesting that IMOs have it in their power the choice to “live free or die,” created quite a stir. The general reaction seemed to be: The idea of IMOs buying an insurance company future seems like a great idea, but could it really be done?
Probably the most telling comment came from one IMO who said, “I like this idea, but I am concerned about what my company would do [to me] if they discovered that I was involved.” If that does not capsulate the current intimidating environment, nothing will. Many wondered, “This seems like a simple solution, but if it is so good: why hasn’t it already been done?” The answer to that question is that too often there is a tendency to believe that the solution to a complex problem can be found in complicated answers, when in reality the solution is simple; it just has to be recognized.
For example, it is believed that the wheel was invented in the late Neolithic period, around 3500 BC. The idea for luggage was invented shortly after women determined that they needed 10 pairs of shoes for a three-day trip. Ever since then, travelers have lugged and dragged their luggage around – straining tempers, backs and arms. Believe it or not, it was not until 1989 that a guy named Bob Plath came up with the idea of mating wheels with luggage. And, as they say, “the rest is history.” This was the ultimate simple idea that was right in front of everyone for centuries, but no one recognized it.
A Good Offense is the Best Defense
There is no doubt that defending against the efforts of the companies to reduce the options and independence of the IMOs is a difficult task. Companies seem to hold all the leverage and have only one interest at heart– the interests of the company. Worse, those who work for companies owned by foreign powers have scant gumption to challenge the bureaucratic corporate line because they have become little more than timid toadies, perched precariously on the lily pads of their next paycheck.
To push back against company actions, a number of IMOs have banded together is a loose affiliation attempting to gain leverage when dealing with the companies. There is even a movement among some IMOs to consider litigation against these companies. Unfortunately these approaches seem destined to fail. Aside from the fact that it is futile to negotiate with the devil, these approaches are too fractured and complicated; they address neither the heart of the problem nor the simple solution needed to level the playing field with the companies.
To understand the solution, it is important to understand the problem. The insurance business is divided into three parts: manufacturing, distribution and service to the distribution system and policyholder. The insurance companies already control two of the parts – manufacturing and service – and they now seek to control the final distribution piece. The path for IMOs to protect their control of distribution is not to fight the companies on their terms, but to diminish the strength of the companies, which is in manufacturing. If the IMOs can gain access and control of manufacturing the product, they will nullify the leverage used by companies in an effort to contain and control distribution.
Another factor the IMOs should take into account as they consider becoming involved in the manufacturing process is this: Just how much backing and service are the companies providing to the IMOs today? Aside from commissions, do the companies offer financial assistance to help fund growth? Are the companies doing anything to assist and protect in the recruiting and retention of agents? Sure, they have meetings with PowerPoint presentations that tediously explain product details, but are companies doing anything positive to assist the IMOs in teaching the agents to prospect, present and close? If the IMOs are hard-pressed to identify value being provided by the companies, they have another reason to question why they put up with the shenanigans of the companies.
The path for IMO control of their future and enhanced value of their organizations is to take actions that give them options and reduce their dependence on a single company. The way to do that is to turn the tables on the companies and take control of the manufacturing piece of the insurance equation. The crucial question is: How can that be accomplished?
Mighty Oaks from Acorns Grow
To start, a group of leading IMOs needs to unite with the common purpose of protecting their future. These IMOs should demonstrate their seriousness by agreeing to put some “skin in the game” by investing a portion of their own capital as part of an acquisition of a company. It does not have to be a huge amount of capital, but enough to demonstrate to investment companies that the IMOs are committed to the venture. Once the group has been assembled and an appropriate amount of capital pledged, the group should identify an experienced, credible core group of management that would manage the acquired company.
When these two steps have been completed, investment bankers could be retained and they in turn would put the group in front of private equity firms that have experience or interest in investing in the life insurance and annuity business. Once the investment firms have been brought on board, the process of identifying a target can begin.
With the power of distribution held by the IMOs, there is no need for huge amounts of capital to acquire a large company. (The IMOs will quickly make it large!). The best guess is that an acquisition of a company in the $50 to $100 million range would meet the initial needs of the IMO. (The irony here is that for the investment firms, the larger the acquisition the better.) Once the company has been acquired and the IMO management team in place, product development, support services and administration can be quickly developed.
This process may seem complicated and time-consuming, but it would not be. With the control and power of distribution that IMOs offer to the investment firms, they will find that this is just as simple and easy as attaching wheels to luggage, with the same revolutionary results.
And the Moral of the Story …
Many go through life frustrated with the lack of control they have over their future. They feel trapped and constrained when their future is held hostage to the whims and actions of others. Even most of those who rise to the heights of the corporate world often lack control over their future. Real power is the power to control one’s future. It does not assure future success but it does assure a future in which success can be attained.
Due to their proven ability to recruit, train and motivate individuals to sell insurance products, IMOs are in a unique position to control their future. Intimidated by this power, some insurance companies are attempting to denude the IMO by limiting their options and creating a dependence on the company.
The good news is that the IMOs have the power to get “mad as hell and not take it anymore!” The bad news is that if the IMOs meekly allow the companies to succeed if their efforts to control the future of IMOs, then that is the future they will deservedly reap. Unlike others, IMOs have the power to control their future and how they respond will determine if they live free or die.