Harsh times ahead for anyone selling insurance products
If it weren't for insurance brokers, the U.K. insurance job market would have been pretty much moribund in the the first half of this year. As our analysis a few weeks ago showed, brokers have been some of the biggest hirers in 2014 and brokerage jobs have risen even as the number of other insurance jobs has declined. But a new report from the Boston Consulting Group (BCG) suggests the European insurance broking market is on the cusp of some big changes - and that the intermediaries selling insurance products will need to adapt.
BCG points to two separate forthcoming sets of sales regulations for insurance companies. Familiar to anyone working in the insurance industry, the first, the 'Packaged Retail and Insurance-based Investment Products' (PRIIPS) regulations, are due for implementation in 2015 and will cover most investment and life-insurance products. The second, the 'Insurance Mediation Directive' (IMD 2), is due to be implemented in 2015-2016 and will cover all kinds of insurance, from life to property and casualty, and health.
BCG summarizes the impact of both directives in the table below (click to enlarge).
A ban on insurance commissions? Or not
At the very worst, BCG says the new regulations could lead to a ban on commissions in the insurance industry across Europe - something the UK's Financial Advisers are already familiar with.
However, this is deemed unlikely. BCG says it's more probable that individual insurance salespeople will simply become less productive as they're forced to deal with the new transparency requirements and associated paperwork. "Hardest hit will be those sales agents who currently focus on quick sales and don’t do a lot of individualized analysis before recommending life insurance products to customers," they suggest. "These salespeople may have to entirely revamp their approach."
Insurance salespeople living hand-to-mouth
Insurance sales professionals face a further battering from transparency surrounding fees. Once customers realize how much they're paying intermediaries, BCG says they're more likely to go for lower cost options like direct sales channels. Together with falling productivity, BCG predicts that this will force some people out of the industry altogether.
How to survive as an insurance salesperson in the coming famine
If you want to survive in insurance sales, BCG suggests you might want to focus on higher value customers at the wealthier end of the market: they are actually prepared to pay for advice. Alternatively, you might want to become an expert in drawing up insurance documentation, or to learn how to programme and set up a direct sales insurance website...
The good news is that BCG says the UK's insurance salespeople should be less impacted by the new regulations than salespeople in continental Europe. However, this is only because they're starting from a position of disadvantage already. "The EU regulations will likely have minimal impact on most companies in the UK—for the same reason that tossing a bucket of water on someone who has just emerged from a swim in the ocean doesn’t have much impact," say the consultants.