Few people believed self-serve gas stations would succeed. Who would pump his own gas? "In the beginning, the clerks sold more Cokes than gas," says Dave Hill, CLU, senior vice president and chief marketing officer at Americo Life in Kansas City, MO. Now, he points out, it's hard to find a full-service pump in most cities.

Self-serve life insurance sounds just as nutty to many people. Nonetheless, is the day coming when there won't be a full-service insurance agent on every corner?

Probably. But they'll still be on every other corner. Even as pockets of customers choose the new distribution channels--the Internet, retail centers, banks--now being offered to them, it's not hard to find companies touting their loyalty to agents and their commitment to the incentive programs that reward them. And even where agent forces are shrinking, it's not the qualifiers who are dropping off the rosters.

But if incentive meetings disappear only from those few companies--and there are a few--that decide to dump their agent forces entirely, other distribution shifts are likely to have an effect on the incentive trip as we know it.

Only the Stars Survive? Dan Sullivan is blunt about the future of insurance distribution: The only agents traversing the new insurance industry landscape will be the star agents, he says.

Sullivan, a financial services coach and president of Strategic Coaches, Inc., pos-its that the U.S. economy--and our entire society--is shifting from a bureaucratic model exemplified by career agents to an entrepreneurial model exemplified by independent agents and producer groups. (See sidebar, page 64.) Addressing a recent General Agents and Managers Association (GAMA) LAMP meeting in Orlando, Sullivan predicted that "over the next ten years, there will be a severe erosion of that segment of the agency force that is not capable of the high-level sale." The high-level sale, he explained, involves "creative" insurance products as opposed to "commodity" insurance products.

In the U.S., Sullivan reported, the agent force already has been pared down from 290,000 to 220,000. "The erosion is speeding up," he said. The newest statistics from the Life Insurance Marketing Research Association (LIMRA) bear this out. At year-end 1996, the count of full-time agents in U.S. career companies was down to 192,750. The pattern, Sullivan suggested, reveals that this country could experience the dramatic declines seen by some other English-speaking countries. In the past five years in the U.K., for example, the agent force decreased from 250,000 to 70,000; and in Australia, New Zealand, and South Africa over the past ten years, agent ranks are down 60 percent. Sullivan believes this is a selective shrinking: "What's being lost is the low sale," he told the GAMA audience.

Indeed, a LIMRA press release attributes the recent agent decline in part to companies instituting or strictly enforcing minimum production requirements for agents. "Both measures resulted in the winnowing of marginal producers," the release states.

Career agents at Paul Revere found themselves being "winnowed" after Provident Cos. took over the Worcester, MA-based insurer last year. Some 400 career agents are suing the acquiring company over what they call their unfair dismissal, according to a report in National Underwriter. Provident says all career agents who met minimum sales targets were offered a chance to join the company as independent agents.

Independents Day Another LIMRA statistic tells a slightly more optimistic story, however. Agent recruiting in the U.S., the association reports, remained level in 1996 as compared to 1995, making last year the first year since 1990 in which agent recruiting did not decline.

At Columbus Life in Cincinnati, in fact, Jerry Stillwell, vice president of sales, points out that the company's agent force is growing, not declining. These agents are not career agents, however. "We brought on 43 new general agents during 1996," he says. "We have been forever distributing our products through the independent agency system. That is our core competency. As we look to expand distribution, we will focus on how we can build on that core competency. How can we expand distribution and still use human beings to deliver the product?" (Stillwell recently left Columbus Life to join Lafayette Life in Lafayette, IN, as senior vice president/CMO.)

Americo's David Hill is equally clear about maintaining the company's traditions. "We are committed to our agents," he says. "We have said we will allocate at least 80 percent of our resources to expand products and services that support the agency distribution system." That includes incentive meetings.

Likewise, Pat Kenney, vice president and director of agencies at Security Mutual Life in Lincoln, NE, says the company's aim is to expand the number of distribution channels, rather than replace one with another. "We see more agents selling in the future, not less," he says. Retaining its place at the heart of Security Mutual's sales, the agency system will keep its yearly President's Club meeting and biennial sales conference intact.

One alternative distribution arena for Security Mutual is the endorsed market (a market made up of members of an association that endorses a single product), he adds. "This is a new distribution system for us and we have priced an incentive program into the system.

"With these specialty distributors, we see additional incentives being offered--group meetings or individual choice. This is under discussion now," he explains. "The distributors themselves like shorter periods of qualification followed by long weekend trips."

Help Agents Help Themselves Companies that want to stick by their agents still must reduce the cost of this distribution channel. Some companies are going after reductions by contracting with agents who are part of a distribution intermediary such as an independent marketing organization (IMO)--the producer groups of which Sullivan is a proponent. This gives them a sales force with a commitment to their products but without the overhead of career agents.

Americo is moving into IMOs, Hill says, which already has had some impact on Americo's annual incentive convention. "Some of these are large marketing organizations that want to do their own thing," he explains. "We had one IMO take about 50 couples on an incentive trip who would have been at Americo's convention. We're seeing more of that than we used to."

Companies like Americo also are using technology to streamline the application, approval, and maintenance of policies. Automating these processes could cut costs by 60 to 70 percent over the life of a policy, some research shows.

At The New England in Boston, says Stephanie Brown, "we've had for many years a very strong, state-of-the-art base technology--the agency workbench. [This includes] 'client-centric' sales and marketing tools to help agents manage their overall activities."

The insurer's 80 general agencies, says Brown, vice president of electronic commerce, also have been given templates to create their own homepages on the World Wide Web. "And within the next month, we're going to be piloting a field intranet to facilitate communication between the home office and the field," she adds. "They'll have the latest sales and marketing material, for example, at the click of a button."

While companies use technology to make prospecting, sales, and policy maintenance more cost-effective, they do not seem eager to cut the cost of agent distribution by cutting their travel rewards. Competition for the best agents, after all, is still keen. "Our incentive meetings are a significant part of our overall marketing plan," says Stillwell, speaking of Columbus Life. "We have no plans to change that emphasis."

Tracey Witte, project manager for information technology at Zurich Kemper Life in Long Grove, IL, says the insurer has come around to a partnership with agents that uses technology to increase sales efficiency while maintaining the value--and recognition--of the agent. "When we spearheaded Tele-Life three years ago, our agents thought they would be cut out of the sale," Witte recalls. Instead, TeleLife was designed to let the agent focus on making sales while the company took care of the administrative tasks. "We've been able to cut costs on the back end so we did not have to cut compensation on the agents' end," says Witte.

Zurich Kemper's Tele-Life allows a customer to fill out a life insurance application at the company's Web site. Initially, the insurer would pass every application directly on to an agent, who would then contact the customer. "This didn't work," Witte says, "because the agent was trying to sell the customer in the traditional way"--something the customer clearly didn't want, otherwise he or she would have called an agent rather than filling out an online application.

Then the insurer temporarily tried to handle all online applications at its call-processing center. This didn't work either, because some customers had questions about policies and rates that the phone reps were unequipped to answer.

"Now we're treating it as a partnership. We let the agent know that we received the lead, but we're going at it as a team, leveraging the strengths of our field force with the strengths of our information technology and service," she explains. "The agents are a critical part of the process, but they can't go in and sell and service the person as a traditional client. They have to adjust."

Distribution Puzzle This kind of adjustment is being done all over the industry as the one distribution channel that has worked so well for so long comes under fire.

"Some things concern customers about the traditional agent," explains Karen Brett, second vice president, The Principal Financial Group, Des Moines, IA. "One concern we hear in focus groups has to do with agents being compensated through commissions. Another is that customers are less enamored of an agent coming to the house. People lack free time, especially those in dual-income families."

The Principal began reflecting on this kind of feedback more than three years ago, and in October 1995 the company opened its first PrinSource Financial Center--an insurance "store" in a mall in Nashville--and staffed it with salaried employees rather than agents working on commission. (See sidebar, page 58.)

The center has met challenges, including its location. "We didn't have access to the traffic we were looking for," Brett explains. However, the company has learned a lot from the customers it has attracted. "Women love the center," she notes. "They come twice as much as men, they take copious notes, they interact with each other, they really get involved."

The women's market clearly has been underserved, and other potential customers continue to fall through the cracks--and yet the traditional agent will still find buyers who want to sit down at their kitchen tables with him.

"We're not saying that what we have now does not work. There will always be a place for one-on-one counseling," Brett says. "But we have got to be aware that the consumer decides how best to access a company's products and services. So, we have to offer that consumer a variety of ways to do it."

At The New England, the view toward electronic distribution is much the same: The financial representative will continue to play a key sales role, supplemented by other sales options. "The bottom line is we think an environment of choice is going to be absolutely necessary," says Stephanie Brown, who has been responsible for all of the insurer's electronic commerce initiatives since 1995. Whether customers research and select products for purchase online or through a financial representative will depend, she says, "on the complexity of the customer's needs, on the complexity of the product set, and, to some extent, on the comfort level of the customer with the technology. There are more customers than ever that like the idea of the self-serve option."

Still, she points out, actual purchases over the Internet won't happen tomorrow. Accepting applications online, for one thing, depends on individual state laws about the validity of digital signatures. "There will be transactions that will be facilitated by electronic means, but the consummation of a contract is not all going to happen electronically for a little while," she concludes.

While other companies wait for that day, Americo's Dave Hill, who says more than 90 percent of his company's sales volume is still agent-influenced, sees opportunity in the industry's race to be all things to all customers. "We're starting to capitalize on the fact that other companies are reallocating resources to chase other distribution channels," he notes. "Our strategy is to stay focused on agent distribution."

New DistributionRetail Storefronts In a shopping mall in Nashville, you can walk into the PrinSource Financial Center and spend ten minutes--or two hours--getting answers to all your insurance questions without ever having to talk to a salesperson.

"Customers say they don't want to be sold a product," says Karen Brett, second vice president at Des Moines, IA-based The Principal Financial Group, operator of the PrinSource center. "They want someone to help them understand different insurance products and how they might meet their needs."

The Principal makes staffers available to educate consumers at the PrinSource center, but if a customer doesn't want even the feel of a sales environment, he or she has two other options. One is to sit down at a computer and boot up The Principal's interactive software program; the other is to browse through the PrinSource library, which contains videos, books, magazines, and rating agency reports, all designed to demystify the process of selecting and buying insurance.

The software program uses a travel agency theme to help a customer figure out how, financially, to get to one of several "destinations," e.g., retirement or college. "We also hold free seminars on a number of topics, such as buying a home," Brett notes.

"I look at [PrinSource] as the Home Depot of financial services," she continues. "You can go in and buy something; you can go in and get an explanation of how to use something, or you can go in and have us 'install' it all for you. And there's no obligation to buy from us. You could go in, learn all you can, then go on the Internet and buy a piece of term."

Although the staffers at the PrinSource Financial Center are

fully licensed, they are not insurance agents in the traditional sense of the term. They are full-time, salaried employees of The Principal Financial Group. They do not work on commission, but they do operate within a bonus system based on accumulating points. But the points come not just from making a sale; rather, a staff person gets points for filling out a "fact finder" for a customer, for example, or for performing a full needs-assessment with a customer.

Theoretically, Brett says, the retail center staff could qualify for The Principal's "clubs"--the regular incentive trips. But not until the level of traffic at the Nashville center (and at other centers the company might open in the future) increases significantly. You can give the customer what he says he wants, she points out, but you can't make him use it.

New DistributionThe Electronic Agent Say you're surfing the Web one day, thinking about life insurance. You don't know how much you need or what kind you should buy. Your search brings you to InsureMarket by Quicken, Intuit's wildly popular personal financial software.

You don't have a lot of time to spare, so you click on the button marked "60 Second Selector." You answer a series of questions, passing through a number of screens, until your insurance choice pops up--say, a variable insurance policy. Below that is a description of John Hancock Life Insurance Company and a button that will allow you to view a selection of agents in your area.

If the process had turned up "term life" as the appropriate product for you, you'd have been able to fill out an application to get quotes in real time from several companies. You could then choose the company from which you'd like to purchase the product, submit a few more details, and be contacted by a call center representative or agent to complete the process.

Quicken InsureMarket plans to add online quotes and purchasing of auto and home insurance by next year, as well as lead-generation for annuities and long-term care and disability insurance.

Some big names are participating in Quicken's site--John Hancock, Allstate, MetLife, Zurich Kemper, and others. "Companies have noticed that there is a significant number of people out there who are getting online and using the Web to make financial decisions," says Mark McCrery, vice president of marketing for InsureMarket in Alexandria, VA. "It makes sense to put insurance information out there."

As to whether or not companies are banking on big sales, he says no. "These are huge companies. They sell millions of policies a year. And the Internet has been untested until now." InsureMarket, however, now gets hundreds of thousands of hits each month and delivers thousands of quotes, McCrery says. (The company is choosing not to release actual sales data until early next year.)

Web insurance sales fit different companies in different ways, McCrery points out. For example, some companies look at it solely as a way to provide their agents with higher qualified leads. (The average income of an InsureMarket visitor receiving quotes is $69,000; the average face value of a term policy sold through InsureMarket is $750,000.) Direct writers, on the other hand, see the Web site as a way to capture additional direct sales.

"It's whatever the customer chooses," McCrery says. "Look at how these people would buy insurance off line. Some would buy through a call center; some would buy through an agent. It's not just the direct purchasers who are coming online."

New DistributionThe Producer Group Dan Sullivan, coach to the financial services industry and president of Strategic Coaches, Inc., sees the producer group--a large, independent sales and marketing organization that is committed to several companies--as the new distribution model in the insurance industry.

"The producer group will be independent and will operate with minimum requirements," he told a meeting of the General Agents and Managers Association. "There will be a cutoff point below which you cannot be part of the agency. That will lend the necessary elitism. They'll do business with five or six different companies; they'll have their own accounting services, their own legal services; they will be complete selling units." Sullivan predicted that in ten years there will be 2,000 producer group agencies with an average of 40 agents each.

"Producer groups are consumer-focused rather than company-focused," he added, citing a study that covered the reasons agents wanted to become part of these groups. Among those reasons was agents' desire to be part of an elite group. "These agents don't want to show up at the same meetings with low producers," he said. "They absolutely hate being at production meetings with low producers."

Some companies, he predicted, will approach the general agents in their own career agency systems and suggest that they create new marketing companies.

One company, Sun Life of Canada in Wellesley, MA, is making Sullivan's bureaucratic-to-entrepreneurial switch. As reported in National Underwriter (May 26, 1997), Sun Life executives initially coined the term "bragent," to describe their new relationship with their former career agents. Now more like brokers, these agents will meet minimum production levels and will continue to receive services from Sun Life such as training, underwriting, marketing, and the chance to participate in sales and incentive conventions. They also will be free to contract with other insurance companies. But Sun Life will no longer provide their health insurance, overhead, or retirement benefits.

Sullivan said using this new distribution approach could save companies 60 percent of their operating costs--money that could then be used to "sweeten the pot" for the surviving high-producers with more or better trips and bonuses.

"This will require negotiation and it will require bloodletting," Sullivan warned. "Because I believe the current system supports mediocrity."