Originally Posted by xrac
Somarco is right on with his analysis!
I have to agree with Somarco as well. Being with MoO and now being courted by Mass I've had an opportunity to look into the "machinery" of the career shop (even though MoO is not one by strict definition since they pay no salary or advance like Mass and NYL)
Does a carrier office (NYL, Mass, NW, etc.) have to be profitable? Does it have to be self-supporting? Does it have to bring in more in premium than it cost to run the office?
No. Of course not. The HO is the true profit center. If they can't consistantly show returns at a certain level most of the time, you're looking at a company that is going to be in trouble.
I don't have access to the books but it looks to me that a district office is a money sump. The manager has to get big piece of the action, they have to be in a class-A building with admin and technology overhead. This just has to be a big hit to the bottom line unless the company can attract competent manager-recruiters to fill the cubes with gross revenue producing agents... many of whom have to be trained in the company products and sales methods... making this not an easy task... coupled with the traditional failure-rate of agents.
Thirty years ago, life/health was easy. There was whole life and there was term and there was major medical.... not a lot of choice... or complexity... nor was there rapid change in products. With the advent of computers it all changed. Companies had the data to literally invent new products, model them with spreadsheet and other number-crunchers and determine what the risks were before they brought them out (and even then there were failures.)
With all of this technology and innovation and perhaps "risky" products, came a downside: added costs and added regulation (often going hand in hand.) My guess is that for every agent in the field there are two or three people in the HO drawing a salary doing something to please regulators... writing reports, gathering data, holding classes, etc. That all adds up to the cost of doing business.
I'm not sure on this next statement but it seems to me that the only road to success for a career shop is to have a wide product line where the agent can (and must be) the "total" financial advisor for the client. In other words he or she has to be able to sop up almost all of the client assets available for investment and not just sell cheap term like a a carrier (such as Banner or West Coast) that uses the BGA distribution system can (and even that model is showing cracks... witness those GAs that make a big part of their income in providing seminar and marketing "systems" to their flocks rather than from product overrides.)
I know I'll get heat for this, there is a segment of the market that can be marketed (conned?) into buying (term, health, and simple WL) over the internet. I don't believe that will reach overwhelming numbers in the near term, but it is another "strike" against the high-overhead career shop system.
Agents who are really good at this biz... simply don't want or need a manager or the mentoring. They stay for the training and then move on... adding yet another 'cost' the to career model.
Finally, the financial media has a bias against the career model. We hear time after time that an independent agent will always have a better and cheaper product for the client than the "captive" agent. I generally disagree with that. Having looked at the Mass product line, I find it awesome. True, I think that you can always find a "cheaper" product out there no matter whom you write with, but most media people who rag on the poor NYL or Mass agent don't understand that people don't want the cheapest insurance or cheapest doctor or cheapest car repair service... when it comes to their money they want someone whom they feel knows what they are doing and where there is a company that they have heard of that has the resources to withstand a calamity (sub-prime meltdown, Katrina, an epidemic or plague, etc.)
Those are my thoughts. From the agent point of view I don't think there is a wrong answer. However there are agents who should not be independent because they really need to be "managed" for their own good and productivity. There are others who should not be "captive" as it will hinder them. And there are others who have (or want) a practice where the logo and "legitimacy" of either a large house (Mass) or the name of a well-established local agency (
Jones Insurance "Serving Podunk since 1919") is going to be a huge asset to them when going after conservative H-N-W populations.
I'm a baby in this business compared to most of you, but unlike most of you I've been self-employed for 33 years so that gives me a certain perspective that others with more direct insurance industry experience might not have.
And
as always, YMMV.
The Jackass
Career Agency- going bye bye?
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