By Guest Blogger Earl R. Borders III, MBA, CLU, ChFC, RFC, RHU, REBC, LUTCF, CRMS
The historic low levels of life insurance being purchased is a sad reflection of the state of our industry, not the attitude, or deficiency, of the consuming public. A recent study comments that 80% of the people do not have a personal life insurance agent. At the risk of sounding critical, I am merely voicing a grave concern. The low level of coverage is based on the ever-diminishing number of agents, and especially agents servicing middle income homes.
As I view the current state, there are several things that produced the current malady. Please allow me to enumerate my observations.
1.) The demutualization of traditional career carriers. This rush to demutualization caused the companies to be more short-term oriented, quarterly results, etc., rather than the historic long-term approach. Suddenly stock prices became more of a critical issue than long-term growth and stability.
2.) Due to this new paradigm, we saw more consolidation of branch offices, elimination of management and training positions, less recruitment and less financing programs for new agents.
3.) Consequently, more carriers concentrated on the independent distribution channels. The immediate impact was production and profitability with less cost. The long-term dilemma this produced was that the independent field force is aging, retiring and passing and has little capacity to recruit or train their replacements.
4.) Thus we have an unserved public due to lack of a field force to sell the product. Life insurance has always been a product that had to be sold, not one people bought. This requires salesmen making calls and seeing people. Unfortunately, with a few notable exceptions, the breeding ground for these agents has all but vanished. Agents must be recruited, they must have a company that can finance them while they learn.
Sadly, many companies take a pecuniary approach where they expect a novice agent to work totally on a commission basis. This not only hinders successful recruitment but retention as well. Also, the fact that an agent's total compensation, in many cases, is commission has driven many agents to ignore the low- and middle-income markets and target the affluent. This is no fault of the agent, as this is where he must concentrate to generate enough income to remain in the business.
In the past, many carriers paid a service allowance to supplement the commissions generated. In too many cases this has been eliminated today, as has renewals on many policies. These agents must also have experienced personnel that can train them. Unfortunately, training positions have been severely reduced or completely eliminated in some cases. Until the profitability of the carriers is severely impacted, I fear the pendulum will not swing.
When there is a realization that the problem is not the consuming public, LIMRA substantiates this fact -- people say they are ready to buy more insurance (See "Households with life insurance hits lowest level in 50 years"). But the lack of agents in the field the matter will not be addressed. My concern is that this realization may not occur until the independent agents currently selling for the companies retire or pass and the production levels reflect this event.
In no way am I disparaging or diminishing the importance of the independent distribution system, merely stating that it is not designed to fill the role traditionally filled by the career agency companies. Therefore, there is a decided lack in our industry. It is my hope that there will be an awareness of the real cause of the problem and we can see a reversal in the position our industry has taken. The public needs the professional insurance agent as never before, and I hope our industry will step up as in times past and resolve this problem.
Earl R. Borders III is Past President NAIFA-Ohio.
Editor's Note: This post originated as a comment to the post "Historic Low Life Insurance Levels Put Families at Risk." It is the opinion of the author, and does not represent a statement by NAIFA, any company or organization.