It seems that everywhere you read these days, the future of the Insurance Management Organization (IMO) is in peril. The southerly trend for IMO distributors is exacerbated on multiple fronts, with one of the biggest being the Department of Labor’s changes to the fiduciary rule. However, other factors that compound the challenge for IMOs are organizational size and the fact that distribution from banks and broker dealers is eating into the Fixed Indexed Annuity (FIA) market in a big way.
Although IMOs accounted for approximately 60% of the FIA market last year, the IMO distribution numbers have been declining while the sales of FIAs are growing. The bank channel is seeing the most rapid growth as they increase their acceptance of indexed products where, historically, their focus was on variable products.
The IMO distribution channel is far from sunsetting. It is still a viable channel, but changes in the landscape will be likely for long-term viability. Considering partnerships to establish themselves as a financial institution is one option. More likely we may see a significant amount of merger and acquisition activity. Given there are an estimated 350 IMOs in a 50-billion-dollar-plus FIA market that is shrinking for IMO distributors, it is important to anticipate that the footprint of the smaller IMO may dramatically change.
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