A survey of life insurance CFOs conducted by the Tillinghast division of Towers Perrin revealed that significant changes in insurance distribution are likely.In March, the Stamford, Conn.-based services firm asked more than 70 executives about the issues underlying distribution and remuneration concerns.

Tillinghast asserts the changes are the result of recent regulatory inquiries and the effects of the National Association of Insurance Commissioners' broker disclosure model amendment.

"The distribution challenges confronting life company management teams continue to intensify," says Towers Perrin principal Rick Berry.

"Mandated disclosure to consumers of producer compensation and carrier relationships (which many CFOs are expecting) could well revolutionize the life distribution business.

It would prompt producers and insurers to rethink their marketing approaches and reevaluate their remuneration and support relationships."

The study revealed that many companies still use traditional measures of sales growth and persistency of in-force business to evaluate distribution performance. Only one quarter of respondents manage distribution as a separate business and evaluate performance on the basis of distribution profitability.

Berry maintains that the shift in mindset from a top-line sales emphasis to active management of distribution as a top- and bottom-line business remains critical and challenging for life company management teams.

"Understanding the consistency and quality of business developed by different production units and distribution channels-and the cost to acquire and support them-is critical to long-term insurer success," he says.

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