What Does 2010 Have in Store?

Forecasts always contain good news and bad news. As we enter 2010, the good news for our industry is that there will always be a need for professional health and life insurance agents, and there might be fewer people competing for this business. The challenge will likely be a continued reduction in commission rates and fewer resources provided by the insurance companies. Also, the products and how they are sold will continue to evolve, but that can be both good and bad news.

As I write this, the national health-care reform package is still firming up, but whatever is eventually passed out of the 111th Congress will have a major and long-lasting impact on our industry and all Americans. The changes are not likely to take effect until 2013, so the impact in 2010 will be incremental. In the short term, we likely will see insurers, agencies, and others begin to position themselves to play by the new rules.

Health insurers will probably have to implement numerous major changes to ensure compliance with the new rules. For example, underwriters likely will no longer have the option to decline, rider, or rate-up people for individual medical coverage. This will force underwriting departments to transition into enrollment departments, similar to what happened in the small group market over the past 15 years. Actuaries will have to try to set rates based on assessed risk without the ability to exclude any of it. If an individual mandate passes (and stands up to likely lawsuits challenging its constitutionality), requiring all Americans to obtain health insurance, commissions are sure to go down. Agents and agencies will need to write more business, more efficiently, to continue earning a good living in the health insurance market.

Adapt to Succeed

Most agents and agencies that focus primarily in the employee benefits market have begun to diversify over the past year or so. Those that have not will need to, quickly, if they plan to continue in this industry. Selling small group insurance against a public option or through an exchange, exclusively, is not likely to be a profitable business. Employee benefits agencies have outstanding relationships to position themselves as financial advisors to business owners and their employees. Making sure that they are all aware that you can help with their life, disability, long-term care, and supplemental insurances is crucial, as there will continue to be a great need for all of these products even if the government eventually takes over the health insurance market.

Life insurance sales remain strong. I anticipate agents moving away from just term sales to a total-needs approach that will pair a small, guaranteed no-lapse universal life policy with term insurance. This approach is generally the best one for the client and can potentially double an agent's commission. Everyone will need to have some life insurance in force when they die. Agents should strive to sell a blend of permanent and term insurance. Everyone who buys term life insurance should have at least $50,000 to $250,000 of permanent coverage, as well, depending on their situation.

More Markets

Disability and long-term care insurance will become a focus for more agents and advisors. Agents who have not entered these markets should get the necessary certifications to do so, and then start discussing them with their clients. An eight-hour long-term care certification is now required, followed by a four-hour refresher course every two years after the original certification. Many agents took the certification course in 2007 when this requirement was implemented. Those agents should have taken the four-hour refresher course by now to remain in compliance. Agents can check with their local Association of Health Underwriters or NAIFA chapters to see if they are offering these courses.

Many agents have avoided selling disability income insurance in the past. These reluctant agents would be wise to get up to speed on these products now, as the need for them is great and should not be impacted by any of the legislation coming out of Congress. Agents should look to have a relationship with a general agent who markets disability income products or with a carrier that has a sales representative in the field to support their efforts. Disability is not an easy sale, so you will want all of the support you can get for this product.

In summary, 2010 will be a year of transition. Insurance carriers will be interpreting the new rules and responding with changes to products, departments, staff, and marketing. Insurance agents and agencies will have to decide which direction they want to go. Some will choose to retire or close their doors, others will diversify and/or change their focus. Those who remain in the business will have to change how they do business. However, there will continue to be an unlimited supply of people who need the products and services offered by professional insurance agents. This should be a very successful year for those who focus on opportunities and move in the right direction.

Dave Sherrill is vice president of Sherrill Insurance Brokerage (www.sherrillins.com), a full-service wholesale office in Central Florida marketing health, life, long-term care, dental, disability, annuities and Medicare supplements. He also serves as executive director of the Florida Association of Health Underwriters (www.fahu.org). He may be reached at 407-831-5000 or dave@sherrillins.com.