Unum formalizes MGA distribution

By Mathew Kokas | March 20 2001 08:40PM

“Thanks, but no thanks.” That was the message Unum gave MGAs just two years ago. It didn’t see the value of MGAs and continued to deal directly with producers. But times have changed. The insurer has since re-evaluated its distribution strategy, and decided to sign-up a limited number of MGAs.

But why make the switch now after sticking with its direct-to-producer system for so long? Simply put, “the MGAs increased their value in the last couple of years,” said Scott Moffatt, Assistant Vice-President Market Development with Unum. For years MGAs have been coming to Unum with producers, he explained, “but we did business with them anyway. They said they offer recruitment and processing and follow up on underwriting. But we already did that. We didn’t see the value two years ago. We said: ‘Thanks, but no thanks.’”

However, remarked Mr. Moffatt, “we are finding that producers are tied more and more to one MGA.” Brokers want one stop shopping, and they could often make more money with Unum’s competitors, he explained. “So we asked ourselves what do we need to do to be in a more favourable light.” Although working already with MGAs to a limited extent, Unum set out to solidify and expand these relationships.

“The evolution is towards the MGA system and away from career,” he added. Other companies have been and continue to transition away from career agents. But he stated that companies also have to pay more for access to this distribution. “The override in US no where near what it is here in Canada,” he noted.

Consequently, Unum has revamped its compensation to be more competitive. “Our fear would have been, if MGAs promoted a competitor to a producer. We did not want to be always viewed as the “other” DI carrier,” said Mr. Moffatt. He added that administration has been improved, and they have reworked the process of communicating directly with head office. Underwriters will now also communicate directly with MGAs. Mr. Moffatt said he wants his company to be known as offering the best support out there.

Because of the higher bonus schedules and compensation, costs are going to increase, continued Mr. Moffatt. “We are absorbing the added costs, but in turn we hope to be more productive and more efficient with the distribution system.”

Unum will continue to deal directly with producers and its national accounts, effectively maintaining three distribution channels. Mr. Moffatt stated that Unum has around 28 national and/or partner accounts (which usually have a captive distribution force, and Unum pays a fee to access that distribution) that make up roughly 40% of its total sales.

Unum deals with about 6,000 producers, 50% of whom are regular, stated Mr. Moffatt. He said he expects most to go to an MGA, although some will continue just as before. He said those producers will be able to match compensation only at higher levels. Low to mid-size level producers could do better with an MGA, depending on the MGA’s bonus structure. Unum will not promote one MGA over another.

Unum will also keep all of its local field offices. Producers, said Mr. Moffatt, will still go through a screening process through the field offices. He said he expects more business as a result of the MGAs and most of the staff at the field offices are sales assistants as well. “So they will keep busy and work with the MGAs at the local level,” said Mr. Moffatt.

The rollout of the strategy began the first week of January with the signing of Montreal-based Copoloff Insurance Agencies. By the end of February, it had 11 more signed and eight more “on the table.” Mr. Moffatt stated that the company will sign a total of 25 MGA contracts. He added that out of the 25, it had relationships with 18 already. The limited number will help the MGAs to be successful in their own regions, concluded Mr. Moffatt.

With the ink on the contract still wet, Copoloff embarked on an aggressive national advertising campaign announcing the agreement. Shelly Copoloff, Vice-President of Operations said her company has been waiting years for Unum to finally open the doors. She said the amount of business it was previously doing with Unum was negligible. Now, she said, brokers who have never sold DI are closing sales. Daniel Poirier, Brokerage Consultant with Copoloff said that the new contract has even attracted a number of new brokers to the MGA.

“It allows the brokers a lot more choices in DI,” said Mr. Poirier. “Its product is one of the best and the price is very competitive in the market.”