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Why Diversifying Your Product Portfolio Makes Good Business Sense

May 18, 2022

By Pat Fleming, Executive Vice President of Product Innovation and Corporate Actuary

In the past, marketers and licensed agents could reasonably expect to accumulate plenty of business by focusing on a single product line. As a result, there wasn’t much pressure to enlarge their portfolio of offerings. Yet even if inclined to expand their horizons, marketers and licensed agents simply didn’t have access to the data, resources, or tools that would facilitate the sale of a diverse set of insurance products. The environment is changing, however.

During recent years, the advantages of product diversification have become too large to ignore. Key among them:

  • Product diversification reduces risk – Many products are affected by factors such as economic conditions/cycles, changes in interest rates and government regulation. The pandemic is another example of an unexpected event that affected products in multiple ways. Just as investors diversify their portfolios to avoid having “too many eggs in one basket,” distributors can lessen risk through product diversification.
  • Product diversification opens the door to growth opportunities – Marketers and licensed agents are now seeing examples of success and opportunities for growth in terms of sales and compensation (and improvement in persistency) by looking at products across multiple lines. For example, marketers and licensed agents have recognized that annuities, life insurance products, specialty health insurance (hospital indemnity, dental) and other products are natural fits to sell alongside a Medicare product. Additional product offerings are almost always complementary in nature, and meet multiple consumer needs, which provides great opportunities for business growth.
  • Product diversification is in the customer’s best interest – A single product focus cannot meet all customer needs. Only a well-rounded portfolio of insurance solutions (i.e. Medicare, life insurance, specialty health Insurance and wealth and retirement planning products) will enable marketers and licensed agents to assist their clients in meeting all of their pre-retirement and retirement needs, and achieve our goal of assisting them in living longer, healthier, and more secure lives.

At AmeriLife, we continually see product diversification in action. As an example, at least one of our affiliated marketing companies with a previously single-minded focus on final expense insurance is now also successfully offering Medicare Advantage coverage.

The Changing Landscape
Absence of data, tools and education have stood as roadblocks to product diversification, but that is changing. Today:

  • We are acquiring data that confirms how diversification of distribution across product lines promotes compensation growth, improves persistency across products and strengthens agent-customer relationships.
  • We now have advanced tools that make it easy for marketers, licensed agents and customers to access a wide variety of products and facilitate multiple-product sales.
  • Training and educational initiatives are available to help marketers and licensed agents recognize and appreciate the benefits of cross-selling.

At AmeriLife, we are working hard to offer the resources, training, and product lines that are necessary to effectively diversify a marketing organization’s portfolio. Our approach to selling holistic solutions is formulated to meet consumer needs while providing great growth opportunities for distributors, marketers and licensed agents.

Product diversification is best viewed as an opportunity rather than a risk, and marketing organizations should take an incremental approach toward offering a wider range of solutions to consumers. Certainly, no one advocates abandoning products that have brought an organization success. Companies that stand to make the greatest headway through diversification are those who can maintain the business levels of proven product lines. They then build on their success by attaching complementary products that improve the overall financial wellness of customers.

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