The financial industry is stabilizing, but one area that is positively bustling is that of independent insurance-product distribution through banks.

As insurance companies have cut back on their in-house wholesaling operations, companies like Four Seasons Financial Group, based in Mount Laurel, N.J., have stepped in to take up the slack. Eighteen-year-old Four Seasons, which distributes annuities, life insurance and other products through financial institutions, grew its revenue by 13% last year, and increased it by 55% in the first five months of this year.

“Out of adversity came opportunity for us,” says Jim Sorebo, president of Four Seasons.

Independent insurance distributors both old and new have benefited from insurance companies’ cutbacks, which were made in response to the financial crisis and recession.

“During the great crisis, a lot of insurance companies cut back on their wholesaling forces, and some abolished them,” says Ken Kehrer, director of research firm Kehrer-LIMRA. “Now, companies stepping forward to represent insurers is where the growth is.”

The independent distributors usually represent multiple insurance companies, helping them to get their products distributed in banks and providing marketing and wholesaling support.

Partnering with these firms is a tradeoff for insurers. On the negative side, it costs them the direct relationships and product exclusivity that they enjoyed by employing in-house wholesaling teams. On the positive side, using the third-party firms is a powerful way to control costs.

In-house wholesalers typically earn six-figure incomes, rack up hefty travel costs and have access to generous expense accounts. Using independent third-party firms can eliminate millions of dollars of overhead, those in the industry say. What’s more, the outside firms are typically paid on a variable-cost basis: They get paid when they deliver sales.

Some of the new firms that have emerged have a sharp product focus. For The Fimark Group, in Boca Raton, Fla., its indexed annuities, which yields return on contributions based on a specified equity-based index.

Fimark got up and running in September 2010 and is on pace to distribute more than $150 million of indexed annuities, says Bob Wick, co-founder.

Wick says he and partner Steven Effron saw a number of factors creating an opportunity for indexed annuity wholesaling within the bank channel. 

Among them were the fact that fixed-annuity sales were dropping because of low interest rates; insurance companies’ distribution cost-cutting was another, says Wick.

Fimark’s pitch to insurers and banks was that it would be known as the specialist on indexed annuities.  The company’s approach to selling indexed annuities is that while are rate-sensitive, they are wholesaler-driven, says Wick.

“Someone is needed to sit with that broker two or three times to get them comfortable with what really is a third product set (between variable and fixed annuities),” says Wick, whose business employs four wholesalers and targets larger banks.

Four Seasons, meanwhile, has demonstrated that existing independent wholesalers stand to benefit as much as new ones from the dislocation in the insurance industry.

In 2009, the company took over two bank relationships for single-premium life products on behalf of insurers Transamerica and Allstate. In both cases, Four Seasons sharply increased sales, according to Sorebo. Four Seasons has seven dedicated external wholesalers and distributes through more than 50 banks and credit unions. 

A model built around external wholesalers rather than internal wholesalers is one advantage that Four Seasons has over its rivals, says Sorebo.

“Most organizations are not like ours -- they try to do it over the phone, instead of face to face,” says Sorebo, who says his company’s 2011 revenues should fall between $4 million and $7 million.

Meanwhile, the head of one of the older and most successful independent wholesalers says he’s unfazed by the influx of new competition. Twelve-year-old Midwood Financial Services, Inc., which sells fixed and indexed annuities as well as structured certificates of deposit, distributes through 400 banks.

“Having no competition is easier than having competition,” says Alan Blank, president of the company. “But my major competitors are will always be the very, very large life companies like a New York Life, where they are employing their own people.”



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