Making a Sale

Life insurance companies have two basic methods of selling policies, either direct to the public by advertising or via their own salesmen, or through brokers and other agents (what the latest EEC jargon styles "insurance intermediaries"). Many companies use both methods but many also concentrate on one only. For example, there are a handful of companies which pay no introductory commission on their policies and since they cannot therefore sell through agents are restricted to direct public advertising.

Many more companies have no salesmen of their own who canvass the public directly, but rely on intermediaries for their business. There are two basic approaches. In the first case, the company has a widespread network of branches staffed by its own trained "inspectors". These inspectors visit local professional people such as accountants and solicitors and try to persuade them that their policies are worth advocating. If the professional man agrees, he will introduce the inspector to his client and the inspector will make the sale of the policy himself (though the introducer still gets a commission).

In the second case, the company may have a few regional offices but it will grant agencies to outsiders who wish to sell its policies and they will arrange completion of proposal forms and make the sales of policies themselves. In the first case, the company is likely to deal less with full-time insurance brokers since they are quite capable of selling policies themselves, but in the second case the company's personnel will visit brokers as well to advocate the merits of their policies.

The difference of approach has historical factors behind it. Old-established companies that have had a branch network for decades and have built up relationships with many professional people who are part-time agents have a very strong position in this area because the agent has come to know the types of policy the company offers and the service it can provide.

A new company cannot hope to compete here, and in any case building up branch offices is an enormous expense. Newer companies therefore have little choice but to aim directly at the public through their own salesmen and newspaper advertising - as several of the unit-linked companies have done - or to offer the full-time insurance broker such a high standard of service and advice that he is enabled to sell more of their policies.

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Matching Liabilities

The "matching" of liabilities has been referred to and needs a little more explanation. Whenever a life insurance policy is sold, a company takes on a liability, that of paying out the sum insured. The likelihood of this happening at any point in time can be determined from the mortality tables by actuarial calculation. Thus a total of gross liabilities for all current policies can be arrived at over the term of these policies. Since these gross liabilities are spread over a number of years, while the value of assets held today does not include the future premiums to be received, a number of adjustments... see: Matching Liabilities

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