Tuesday, January 25, 2011

(No.134) more about Sun Life, Manulife & MGAs

There were some interesting emails in response to a couple of recent columns on RickardsRead.com: "The Globe looks at insurance distribution" (No. 131) and "Sun Life & Manulife: returns & departures" (No.132). I have selected several from which I have presented excerpts (below). As is my custom I do not identify the writers by name but do try to indicate background and basis of interest.

A Canadian life insurance executive noted, referring to my column on the Globe and Mail articles and managing general agents (MGAs), that "It would be easy to jump on the anti-MGA bandwagon and go down the road with the group extolling the virtues of career [agency] vs. MGA when in fact there are sufficient cracks in both forms of distribution. ... It is the carrier behind either distribution channel that should be held accountable regardless of the status of the licensed individual -- career or broker."

A Sun Life career agent observed, in connection with my column about the Globe articles, that it is "strange that nothing seems to change. It's all new to the next generation and like always they don't pay any attention to the past (I am guilty of this as well). ... You are right about a few things. It is "about selling stuff" and there will always be someone who tries to get ahead by cheating. It's the same in all businesses but especially so in a relationship sale."

A former London Life agency manager wrote that "I'm intrigued by the recent articles in the Globe and Mail on the life insurance distribution system in Canada and its attendant problems. No mention at all of the life companies that used to recruit and train new agents at huge expense, to say nothing of the abysmal 3 year agent retention rate .... It would appear that the reporters of 2010 are no better informed or equipped to report factually than their counterparts in the 70s."

A former life insurance company agency executive, now a consultant, thought my column about the Globe article was " a great piece -- thank you. I particularly like the kudos you gave the Globe for the amount of space and attention given to the subject [ of insurance distribution]."

A longtime Canadian MGA said his view is that "lifecos should hold MGAs to the same standard as they (in some cases) held [career agency system] branch managers in the days of single company representation. Offloading many administration and distribution expenses to the MGA does not/should not relieve insurers of their responsibilities for proper underwriting and appropriate sales/marketing practices on the part of agents from whom they accept business. ... Canada needs far fewer MGAs -- each of which should be subject to more stringent operating standards and oversight from insurers who choose to do business through this channel."

Another Sun Life agent of long experience emailed that "I've been waiting for your comments on the Globe articles. You have hit the nail on the head as usual. Career agents should take no comfort in these articles as the issues raised are just as applicable to career distribution as to brokerage."

Prompted by my column about Sun Life & Manulife and their senior managements, yet another Sun Life agent said, in part, that "I'm so glad you decided that you would blog ... too many good guys have taken up knitting . I don't know if you realize how talented you are. ... In all honesty don't stop writing, your insights are MUCH appreciated."

A former Canadian life insurance company executive said my column on Sun and Manulife was a "great article. Your evaluation of the importance of investing in rather than milking or constraining the career [agency distribution] system is on the money. One can only hope that [Sun Life executives] Vic [Kazazian], Kevin [Strain] and Kevin [Dougherty] will continue to get the support necessary to allow them to make investments in strengthening the one part of individual distribution that really works at adding long term value to [Sun Life]."

A former career agency manager, now a Sun Life agent wrote that the column was "as always a great article. When Sun sold its shares in CI Investments for $2.2 billion, as one of the "sales force" I did not think we'd get anything from it even thought the huge growth [in mutual fund sales] that CI experienced was because of the Sun Life sales force."

A longtime and very successful American MGA thought the column was "a superb piece of work. The field force can smell the bullshit of a phoney CEO a mile away. The problem is, here in the U.S. at least, that for every one K.R. MacGregor there are ten or even twenty D'Alessandros. .... I enjoy RickardsRead enormously."

During the course of an exchange of emails with a financial services analyst working for a bank securities firm: he said he thought my comments on Sun and Manu were "some very fair observations. ... You are so right with respect to agents and their BS detector meters! Have you ever wondered where OSFI [the Office of the Superintendent of Financial Institutions] was during the risk management hedging issue? Oh -- in risk management -- interesting isn't it that all the focus is on VAs and equity markets? But as acknowledged on an earnings call it is has been the drop in rates that has caused the biggest losses."


Alastair Rickard


email: Alastair.Rickard@sympatico.ca