Nationwide has announced that they will let go 2,000 captive agents leading some industry experts to conclude that they could become the first mutual insurer to distribute annuities solely through independent agents.
“To the best of my recollection, this will be the first time a mutual insurance company is distributing annuities exclusively through independent agents,” said Sheryl J. Moore, CEO of Moore Market Intelligence, in a recent InsuranceNewsNet article.
Based in Columbus, Ohio, Nationwide said that the change will be made by July 1, 2020. The company already distributes products through 10,000 independent agents. By releasing 2,000 captive agents, Nationwide hopes to improve its earnings as it will no longer carry the fixed costs associated with that distribution channel.
“Nationwide doesn’t feel like the expense of owning the distribution channel is worthwhile anymore,” said Meyer Shields, an analyst with Keefe Bruyette and Woods.
Last year, Nationwide was the number 3 seller of indexed annuities with sales of $4.6 billion. This was an increase of 70% from 2016, according to Wink.
“It will be interesting to see how this will affect the company’s product development, and what it will mean for policyholder dividends,” Moore said.
It is still unclear if the 2,00 agents who will be cut loose will choose independence or to join another insurer with a captive agent force, like Northwestern Mutual or MassMutual.
“It would be foolhardy to assume that these agents would transition to independent agents, given Nationwide’s decision,” Moore added. “I think it would be more likely that these agents would make the decision to become captive agents underneath another company that distributes through a captive agency distribution model.”
Mark Berven, president and COO of Nationwide Property & Casualty, claims that customer preferences and a desire among agents for more flexibility make it “an opportune time to move to a fully independent model.”
“It will create a win-win for our distribution partners, and ultimately, our members,” he stated.
By turning captive agents into independents, the company is no longer responsible for paying salaries, health and dental insurance, office space and other costs.
“It should improve earning because it make it less expensive for Nationwide to run,” Shields said.
Written by Rachel Summit