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    The Drivers of “Transformational Change”…

    Some would argue that transformational change is driven by desperation; something akin to the mood struck by Bob Dylan when he sings, “When you ain’t got nothing, you got nothing to lose.”

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    The transformational change initiative being undertaken by the Alliance Board is being driven not by despair, but by courage and foresight.  Today the Alliance is a strong and financially healthy organization.  Every year nearly 100% of members renew their membership.  And those that don’t renew typically merge with another member society.  Our membership satisfaction survey scores are off the chart.  Alliance members tell us that they are exceptionally satisfied with the organization’s advocacy initiatives, education and information programs, and opportunities for engagement.  Almost every current member reports that the cost of dues is an excellent value.  These are results that would make trade association leaders in virtually any industry green with envy.

    The leadership of the Alliance is wise enough to know that the time to plan for the future is when the larder is full, and brave enough to take an honest look at what lies ahead.  Because even though the Alliance rarely, if ever, loses a member due to dissatisfaction with the organization’s policies or benefits, we have the fewest number of members – 64 – in our more than 125 year history.  Sure, there are a handful of fraternals that are not members of the Alliance, but the opportunities to grow the organization by increasing the members are limited, to say the least.

    Moreover, it’s a virtual certainty that consolidation within the fraternal sector will continue.  The current pace of mergers – 1-2 per year – may remain steady for the next few years. However, the economies of scale necessary to survive in the life insurance and annuity business, combined with an increasingly complex and costly regulatory system, and the declining brand awareness and relevance of “traditional” bonds with consumers is almost certain to result in further consolidation.

    We are not the only industry undergoing such radical change.  Look at the impact on Macy’s as a result of the advent of Amazon and other on-line retailers.  When was the last time you visited a bookstore?  Do you remember what a travel agent’s office looked like?  Financial services may be the last industry to experience a complete overhaul, but rest assured it’s coming.  We’ve seen hints of it on the regulatory side through the Department of Labor’s fiduciary standard.  While that may be rolled back by the new Administration, the underlying perception of misbehavior on the part of financial institutions and the individuals that sell their products is still very real among consumers.  On the operational side, we see change coming from the likes of companies like Lemonade and others who are not just tweaking the time worn role of insurer and agent, but tossing it out and starting from scratch.

    Next week’s post will review the tough questions the Alliance Board of Directors is asking about the future of the organization (here’s a hint: It all starts with “Why?”).  By extension, these are the same type of questions that every fraternal CEO and board should be asking of their own society.  We’re not printing up “The End is Near” posters. But we are acknowledging – with courage and foresight – that the needs of Alliance members and, more importantly, the needs of the individuals, families, and communities those fraternals serve, has fundamentally changed.  And we are attempting – with courage and foresight – to find the best possible way to meet the needs of the Alliance member societies.

     

    2 Responses

    1. I appreciate your foresight & candidness of this blog.

      In addition, I believe that term life insurance is already being commoditized, however the needs for permanent life insurance will still need to be sold by well-trained, well–educated representatives. That has not changed.

      So, at this point, it is still apparent that nothing has been created that will take the place of either term or permanent life insurance plans to fulfill the needs for which they were created.

      • Thanks, Loren. I agree that the need for our financial services products has never been greater. The majority of Americans are woefully unprepared to fund their retirement and fraternals can play an important role in helping middle-class consumers fill those needs AND strengthening their communities. That said, the way those products are bought and sold is likely to change dramatically in the coming years. Consumers will demand options — one of which will include a professional agent — and those companies that can provide those options (often referred to as Omni-channel access) will be in a much better position to succeed.

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