The initial entry of stock brokerage firms and banks as distributors of life insurance products was widely expected and loudly ballyhooed. Proponents and opponents alike exchanged the customary pre-fight insults to the delight of the financial press, reveling in the prospect of a punch-up among the gentry. In the early betting, stock brokerage firms, and after them banks, were characterized as heavy favorites against the life insurance industry's conventional distribution system. After a decade of experiments involving a variety of distribution and product strategies, no model of success has emerged.

These comments appeared in a 1986 article, "Will Old Banks Learn New Tricks?" It was written by an associate of mine at the time, James C.H. Anderson, president of Tillinghast, now a division of Towers Perrin.

After another decade of trying, stock brokerage firms and banks have shown some success in penetrating the commodity segments of the life insurance business, such as travel accident policies, term life insurance, and single-premium deferred annuities. However, they have made no significant changes to the life insurance industry's traditional agency system.

Both stock brokerages and banks continue to pursue strategies to distribute life insurance in higher-end, service-intensive markets. Will they ever succeed in these lucrative, noncommodity segments of the market? Probably not, unless they learn new tricks.

When I visit stock brokerage and bank insurance agency operations, as I have often done over the last several years, I almost always ask, "How many of the firm's senior executives have bought personal life insurance through this agency?" The unanimous response so far has been, "None."

They why do they expect the institution's customers to do so? The typical response is that customers hold an image of trust in the institution. Well, time has proved that is not enough.

Stock brokerage firms and banks have failed to remedy critical weaknesses of the traditional agency system. They have gained knowledge and skills by raiding sales staff from the conventional agency system. But the result is that they sell the same products with the same high loads at the same price and in the same manner as the life insurance industry's traditional agency system.

It is clear that a strategic opportunity exists in the distribution of financial products and services, including life insurance. Seizing this opportunity will depend on developing and executing sound strategy.

Companies must become client-driven, not customer-driven, and service- led, not product-led. They must differentiate their products through lower cost or higher value, and reduce distribution costs. They must be objective in rendering advice and serving client needs. They must market intensively and face-to-face. And they must have essential life insurance knowledge and skills.

A model of this strategic framework has emerged over the last decade. It includes competitively advantaged, low-load life insurance products offered through professionals who are compensated on the basis of disclosed commissions or agreed fees for services.

In the emerging model, selling activities, though intense and face-to- face, are service-driven, not product-driven. And relationships are client- based and ongoing, not customer-based and traditional.

Even the life insurance industry's traditional agency system is struggling to hold market share. Some are transforming their practices. New players are emerging, too, including accountants, attorneys, asset managers, and financial planners.

Will old dogs learn new tricks? Sure, some will. And they'll join the "new dogs" that are emerging to serve the life insurance needs of high-end personal and business markets.

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