In their unending quest for new sales and bigger commissions, life insurance professionals often lose sight of the very individuals who helped to sustain their practices when the going was rough. Often, such "orphan" policyholders are sidelined through simple neglect or an inability of the advisor to maintain contact with an expanding clientele. At other times, the retirement, relocation, termination or death of an agent is to blame for the break in servicing. Whatever the cause, observers say, the result can be bad for business.
"The incidence of repeat buying from [orphaned] policyholders who don't get contacted is very low," says Bill Griffith, a regional managing director at Principal Financial Group, Des Moines, Iowa. "So if a client bought a policy from an agent and never heard from him or her again, then the individual's next purchase will probably be from somebody else. What people want most is to know that their insurance company and their advisor care about them."
That message has not been lost on insurers who are intent on keeping their orphaned customers within the fold. Those surveyed for this article by National Underwriter, including MetLife, New York Life and Principal Financial Group, have instituted programs, such as the large-scale use of direct mail campaigns, call centers and other outreach initiatives, to maintain contact with these policyholders and, ultimately, strengthen once tenuous relationships through renewed sales.
Such proactive efforts, sources say, will have to be adopted more widely if the insurance community is to reduce what many believe is still a substantial number of orphan policyholders. A 2004 survey conducted by Toronto, Ont.-based NewLink Group pegged the percentage of orphans at 36% of personal life policy holders in Canada and 29% in the U.S. Of clients who purchased from a life agent/broker, 41% (Can.) and 39% (U.S.) considered themselves orphans, according to the study. These rates compared with 18% (Can.) and 22% (U.S.) of those who purchased from a financial planner or advisor.
The report attributed the high rates mainly to the evolution in the distribution channel from a once predominantly captive agent field force to a now largely independent channel. One result, the report's authors noted, has been a "dramatic weakening of the transition process" and a "loss of accountability." The solution to the problem, the authors added, is not a return to the old distribution model, but to institute direct marketing solutions that allow advisors to more easily communicate with customers through non-face-to-face channels, including the phone, postal mail and e-mail.
For guidance in employing these direct marketing methods, independent advisors might look to the career agencies. Joe Jordon, a senior vice president at MetLife, says the company's efforts to recapture its orphan policyholders are part of a marketing initiative to up-sell and cross-sell insurance and financial services solutions, such as disability income and long term care products. The direct mail campaign–dubbed ERWEC–targets existing clients, including an estimated 475,000 policyholders who each own $250,000 or less in life insurance.
Prominently featured in the mailings is the MetLife's Starter Kit, a package tailored to (among others) young families and professionals and that includes information on term life and disability income insurance offerings. Also featured is literature on human life value, a technique for determining the economic value that one provides to a household over a lifetime and, thus, the amount of life insurance that should be purchased.
Not all of mailers focus so prominently on products. Every month, says Jordan, the company sends "legislative birthday" letters to clients aged 59 1/2 , 62 and 70 1/2 notifying them that they are eligible or required (depending on their age) to withdraw funds from a qualified retirement plan, Social Security or individual retirement account. Those customers reaching age 50 are also informed they may contribute an additional $5,000 annually into a 401(k).
"What we have is not an orphan policy program, but an overall strategy that aims to educate all of our clients–both orphans and non-orphans–about their income protection and retirement planning options," says Jordan. "The beauty of the legislative birthdays is that each year, there are another 275,000 people to mail to."
Clients who respond positively to the campaign are referred to life insurance professionals in MetLife's 8,000-agent strong field force. Among these are approximately 6,000 "affiliated" (or career) agents and 2,500 advisors connected to a general agency system-based of MetLife's New England Financial channel.
New York Life also uses direct mail to reconnect with orphan policyholders. Ed Tobin, a corporate vice president for the company, says that a letter goes to out to clients within 60 to 90 days of an agent's departure notifying them of the termination and of the opportunity to meet with another agent.
