Winnipeg-based great-West Life Assurance Co. (GWL) is embarking on a restructuring effort designed to create closer ties among the various distribution channels at the company and its Canadian insurance subsidiaries.

The changes are raising questions in the industry about the future of GWL's multi-faceted distribution strategy and whether more dramatic changes to the company's various advisor networks could be in store.

"When you have different distribution channels, as [GWL] has, you can't keep everyone happy," says Ross Morton, an independent insurance industry consultant in Toronto. "GWL has tried to do too many things for too many groups within our industry. I think [these changes are] long overdue."

In March, GWL and its subsidiaries, Toronto-based Canada Life Assurance Co. and London, Ont.-based London Life Insurance Co., consolidated their distribution activities under a single umbrella called the Advisory Network. That new GWL division combines the support services for advisors within each sales channel: Freedom 55 Financial, the career sales channel for London Life; the Gold Key network, which is composed of independent advisors who have a direct relationship with GWL; and independent advisors affiliated with national accounts and managing general agencies.

The goal of these distribution changes, according to GWL, is to build consistency and standardization in advisor support.

GWL declined an interview request from Investment Executive (IE). However, in an emailed statement, Nick Pszeniczny, executive vice president, strategy and customer marketing, of the Advisory Network, stated that the changes "will help us strengthen the support we provide to advisors."

The initiative follows other changes revealed in November 2016, when GWL, Canada Life and London Life announced that they would restructure their Canadian operations around two business units: one focused on individual customers and one focused on group customers. That brings the companies' individual insurance, individual retirement and investment product lines together into one consolidated unit and merges group retirement services with group insurance.

The recent changes are expected to result in productivity gains and cost savings, which will support earnings growth, according to recent financial statements from GWL's parent company, Great-West Lifeco Inc.

At a time when all insurers are grappling with challenges that are squeezing margins, cost-cutting is a key priority for insurers such as GWL, says Jim Ruta, formerly an executive agency manager and now a career coach with Toronto-based www.JimRuta.com and a video columnist for IE.

"[We have] the perfect storm of compliance pressures, pressures on dividends, interest rate pressures, financial accounting responsibilities and regulation," Ruta says. "To think that these folks are trying to find ways to save money is reasonable."

GWL acquired London Life in 1997 and Canada Life in 2003. Rather than consolidating those companies into GWL operations (as most other insurers have done when making acquisitions), GWL kept the London Life and Canada Life brands and offices largely intact.

"GWL was unique in that respect," Morton says. "It was really the only company that tried to keep the three original entities operating the same way."

Now, Morton believes that GWL is looking for ways to consolidate its operations in a more meaningful way in order to eliminate redundancies and unnecessary overlap: "I believe the time is right for [those firms] to consolidate."

Morton suspects that the creation of the Advisory Network is a step toward merging GWL's distribution efforts into a single channel. "If you can get your distribution down to one main category, or two at the most, you are far more efficient," he says.

Specifically, Morton believes GWL will abandon the Freedom 55 career sales force model eventually and focus instead on independent advisors. He notes that the captive channel is far more expensive because it comes with hefty fixed costs associated with offices and staff salaries. "You almost can't afford the captive [business model] anymore," he says.

In addition, with greater regulatory focus on the fair treatment of the customer and product suitability, Morton says, the captive approach, which limits advisors to selling one company's products, may not be viable anymore.

In Ruta's opinion, however, the captive channel could play an even bigger role in life insurance distribution in the future. He notes that in the U.S., large companies such as New York-based New York Life Insurance Co. and Milwaukee, Wis.-based Northwestern Mutual Life Insurance Co. are thriving on the captive agency distribution model.

"The Canadian insurance industry hasn't picked up on the career side [in] the way the Americans have," Ruta says. "[That] surprises me."

He believes GWL could be preparing to make a more definitive step toward captive sales.

According to GWL, however, the diversity of its distribution channels is a competitive advantage.

As Great-West Lifeco states in its 2016 management discussion and analysis (MD&A), released in February: "The company's broad spectrum of distribution associates, including exclusive and independent channels, provides important strategic advantages within the Canadian market."

Under the new approach, the MD&A continues, the goal will be "to maximize the use of common tools, processes and support, while tailoring support to specific segments of advisors where appropriate."

The focus, the report adds, will be on support for large cases in all channels.

Jamie Tucker, associate director, insurance, at Fitch Ratings Inc. in New York, says that in spite of the recent restructuring, he does not expect major changes in GWL's Canadian insurance operations. "In our view," Tucker says, "while there have been some changes, the overall strategy remains the same."

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