Is Infertility Killing Independent Distribution?

Infertile?

There's a word I'll bet you've never heard used to describe the fate of independent life insurance distribution. Neither had I, until recently.

Last April, innovation experts at Maddock Douglas sent a brief survey to a sample of people who work in the independent space and asked them a few questions about their take on the future of their business. Specifically, they were asked about the channel's prospects for future growth or decline, its challenges and opportunities, and possible causes of future obsolescence.

While most of the respondents were optimistic about the future, quite a few had interesting takes on the challenges facing the independent space and the possible reasons why it could decline. The majority of responses fell into the category called "we've heard that before." However, the word infertile, stuck out as the most powerful and intriguing descriptor, offering the richest solution set of all.

Word choice is a powerful tool to understand what people are really thinking and feeling. I find it valuable to look at the roots and origins of words, particularly when they are either often or seldom used in a certain context.

When I looked up "infertile" and "infertility" in various online dictionaries, most of the definitions involved people who cannot have babies. That is not surprising — but I will say that my online search, in combination with my being childless by choice, newly married and over 45 has led to an uncomfortable barrage of marketing spam I was not prepared for.

However, I knew there had to be deeper meaning than just that. So I kept looking for synonyms. Barren, arid, fruitless? Ok, we needed something more actionable. So I decided to look up the word with the opposite meaning.

Aha! Fertile, the opposite of infertile, means the ability to bear fruit in great quantities (to be productive) and is characterized by great resourcefulness of thought or imagination (to be inventive).

Now we are talking.

A significant bunch of people said words that related to the inability to attract new blood into the system. A nearly equal number described a basic lack of fertility as defined above, using words like lazy, old, stuck, paradigm, change, shortsightedness and oblivious. The person who used the word infertile spoke for many others, who were describing symptoms versus a problem.

Symptoms or problems?

The top 3 answers most often given to challenges/unmet opportunities in the industry were:

The shrinking sources of new producers
Commoditization and profit margin issues
The vast underserved market

This comes as no surprise, perhaps. The industry has been talking about these three "problems" for at least two decades. Maybe these are not the problems. The industry is missing the big problem. The life insurance industry is becoming irrelevant to young people.

Yikes. That sounds hurtful to some, particularly those who are most passionate and proud of the profession. How could something so important be considered irrelevant?

When I ask people in the industry why life insurance may be less relevant than it was in the past, I often get answers like, "It is an intangible benefit," or, "You have to think about death, so it's too negative," or, "It is not something that has any immediate gratification." While those things are very true, they are not new. Those are characteristics of the product, not trends.

Let's look at insurance from an innovator's perspective and consider three trends that are contributing to less relevance.

Death is not what it used to be. Back when insurance was an innovation, dying was an everyday, top-of-mind risk. Life expectancy was much shorter because of diseases that had no vaccines, like tuberculosis and influenza. There were no workplace safety standards. Medical technology was nowhere near what it is today. And the consequences of the death of the breadwinner were much more extreme because there was usually only one in any family. Death is no longer a top-of-mind risk because the generations before us worked hard to make it so. Life got better, and we should not want to change that.

So, what else is in the way of relevance that we should want to influence?

The way we communicate is outdated. The language and communication style we use today has not changed much over decades. But the consumer has. Words and phrases used in the industry are hard enough to understand. What makes it even worse is that the connotations of words change over time. While those born in the 1930s and '40s know "agent" to describe someone who sells insurance, those born in the 1980s and '90s think FBI or talent agent. While, in context, they might understand the term, the minute we say something that sounds like it is not meant for them, they register it as irrelevant.

In addition, our tone and attitude are often seen as condescending or inauthentic. The industry can make a big difference if it changes the manner in which it communicates with young people. (For more information, refer to the 2010 study of insurance language by Maddock Douglas at http://language.soldnotboughtcom.)

The consumers now sell things to themselves. While people cannot self-serve the insurance transaction easily, they can make decisions about what they want to buy well in advance of visiting with an advisor. It's the same way they are making decisions about other products and services.

There is a term used to describe this trend, and it is called "prosumer." The prosumer is a blurring of the line between the consumer and manufacturer. The "pro" in the word prosumer is either professional, proactive or producer (as in manufacturer). There are many industries that have changed dramatically because of this trend, including photography, music, publishing, travel, law and medicine. These are all industries where there are do-it-yourself options or sufficient information available for consumers to transact or become educated without the help of a professional.

It's happening to agents and brokers today. They spend a lot more time unraveling preconceived notions of what clients need. They are perpetuated by TV personalities, the web and other media. While the industry has tried to fight that problem, the answer lies more in leaning into the trend versus trying to change it — to be out there seeding and feeding the information they are looking at. This requires significant commitment, but it is possible.

The dangers of ignoring irrelevance

At Maddock Douglas, we often talk about Napster Moments, the moment in an industry when someone who has no business being in your business reinvents your business and puts you out of business. LegalZoom, ZipCar or iTunes are all examples of this.

The insurance industry is showing all the classic signs of one that is about to be "napstered" — commoditization, a flight to the high end of the market, a growing underserved market, an imbalance in the supply chain, etc. Most importantly, it is at these points in an industry's life cycle when consumers are most open to accept new alternatives. Young people, in particular, are the most willing to accept new ideas around insurance, especially ones that feel relevant and authentic to them.

Can independent distribution play a role in re-creating relevance? Definitely. Independent distribution possesses an innovation advantage thanks to its entrepreneurial spirit. Without the willingness to try new ventures, nothing revolutionary can exist.

Combating irrelevance with innovation

Successful innovation exists when you have perfect alignment between three things: insights, ideas that meet them, and communication that helps the market understand. When only one or two are correct, an innovation will fail.

The industry's weakest innovation link is insight. The insights must surface specific tensions or frictions that remain unsolved. We need to gain better insights from the Gen Y part of the market. Gen Y is ignored because we think they don't yet have much money and are not perceived to have the need or desire to buy life insurance. If you are thinking this way, you may be interested to know that the oldest Gen Yers are now 35, and many have children. For the younger Ys, there are many other ways to look at filling the needs they have (or will have) when it comes to risk protection. Those risks may be the ones we are already experts in or perhaps others that are more relevant today.

It may be helpful to redefine the business we are in more widely than just life insurance. If the need is not as high on the pecking order as it once was, what else is? Is it finding or keeping a job? Is it losing a mobile device? Is it an unplanned pregnancy? Whatever these risks are, it may help us redefine what we do in the context of lifestyle continuity versus just life insurance. What are all the things that could mess up your plans for the short and long term? Can we solve those? Innovation possibilities open up when we redefine our business.

Are we too afraid?

Many carriers are thirsting for more insight but are reluctant to seek it out because of the fear of how solutions might cannibalize current channels. But is that a good enough excuse for not doing anything and letting someone outside your business reinvent it? Perhaps forward-thinking independent distributors can partner with carriers to gain the needed insight and then innovate the new solutions the market is looking for, together. If someone is going to cannibalize your business, it may as well be you.

More importantly, if you are solving unmet needs in the younger market with a pipeline of new ideas for products, services and business models, it is the perfect antidote to irrelevance. In addition, the profession, whatever that would look like, becomes more relevant as well.

Hmm. Sounds like innovation may be the infertility drug for the insurance industry.

For more on threats to the insurance industry, see:

"Prosumers" Changing the Face of Life Sales

The New Mutuality

Life insurance language: Is it creating irrelevance?