Will Annuity Agents Survive Today's Challenges?

This trend is central to the Massachusetts complaint.

Yet, the Massachusetts complaint causes me to have a degree of sympathy for agents cited and agents in general. Every article published that is negative to annuities–and there have been many–reinforces the tendency of agents to find ways to sidestep annuities' overt inclusion in the agents' marketing. It's a classic vicious cycle.

In my view, the insurance carriers bear primary responsibility for the tactics agents have used to create what they feel are tenable marketing identities.

Here is why: It was the companies that decided to sit back and become "manufacturers" of products and let someone else worry about the training, ethics, coaching, and motivation of the "distributors" (agents) who sell the products.

Further, in many cases, the carriers responded to aggressive product competition in the independent agent channel by raising agent commissions on annuities at the expense of reducing the value for consumers–i.e., those products carried longer surrender penalties, 2-tiered cash values and below-market credited interest rates. One need only look at the history of fixed indexed annuities for a telling example.

Starting with their mass transition to becoming independent producers, agents have increasingly become under-productive.

Consider: Back in the late 1970s, "an app a week" was the goal set for me. Today, agents typically sell few new cases in any given year. This only serves to expand the pursuit of 1035(a) exchanges as well as the attraction of higher commissions. If the agent has only 3 or 4 commission "events" over the course of 12 months, then each event had better be as large as possible. Again, a vicious cycle is at work.

Here too, the life insurance companies bear responsibility–for not providing sufficient support.

Independent annuity agents need consumer-facing technology and compliant, engaging sales and marketing tools so that, in a straight-up manner, they can reach more prospects and sell more annuities. Absent this, their productivity will not increase. The unfortunate result is that many will not be able to successfully transition to lower commission products.

If insurance companies want to build shareholder value, they need to preserve the viability of independent distribution. Only active participation in the distribution process will provide agents with what they really need to succeed.