The disappearing life insurance agent

By Ed Morrow

Intl. Assoc. of Registered Financial Consultants

The flow of new life insurance agents is drying up, and for that we must rest most of the blame on the home offices. After all, it is their responsibility to set a good example, and to provide the training and support systems that an agent in today’s society must master. What are some of these positions of the industry (home offices), and why are they contributors to the demise of the agency system?

In the U.S., the number of life insurance agents and their annual production is diminishing. This is especially true when measured against the increased number of American households who need private insurance products.

Nowhere is this more obvious than the shrinking and aging attendance at life insurance industry meetings. In many cases these forums are like a college alumni gathering — seeing the good old boys from long ago.

However, there are important issues that have reduced the numbers and the image of the life insurance agent. Good agents, who are well established within the U.S., continue to earn an excellent livelihood and enjoy the respect of their clients. But this is an aging and diminishing group. They serve the middle aged and aged part of the population — but they do not effectively reach out to the larger and less affluent portion of the population, ages 25 to 55.

The flow of new agents is drying up, and for that we must rest most of the blame on the home offices. After all, it is their responsibility to set a good example, and to provide the training and support systems that an agent in today’s society must master. What are some of the positions of the industry (home offices), and why are they contributing to the demise of the agency system?

The advice of agents is worth nothing
Yes, that is exactly the message that nearly 99 percent of the agents, especially the newest ones, consistently receive. Home offices do not want their agents to deliver comprehensive advice and receive a fee. They think the lure of receiving a planning fee will deter them from selling large volumes of insurance.

How foolish. Look at how the Top of the Table MDRT members describe themselves. Most have a private company whose name indentifies their services. They charge legitimate fees for their services, and they sell a lot of insurance. A major element in their success is that their clients genuinely appreciate this excellent advice and service. Paying for that service does not deter the client from buying insurance. In fact, it increases the likelihood of the agent making the sale.
The image of life insurance agents sucks
If a home office chief executive or financial services representative is offended by this, tough. It is true. Even the clients of top producers will tell you that the image of life insurance agents is terrible (except for their agent who is knowledgeable, compassionate and always helpful).

Why is this true? Because most agents are poorly trained, ineptly lead and improperly motivated. Home offices no longer aggressively encourage their new agents to enroll in courses, obtain designations and become active in organizations. No, what they want is production, production, production, forgetting that new ideas and skills always lead to increased sales.

Many companies emphasize only production, with no accolades for community service or the enhanced professional posture of their agents. They specialize in trophies and plaques that glorify the insurance company and send the wrong message to the prospect. They are saying, “My primary business purpose is to sell you something so I can acquire a bigger trophy!”

Life company training is almost an oxymoron
Definition of oxymoron according to Webster: a combination of contradictory or incongruous terms.

When I started in life insurance, it was common for most medium-sized agencies to have a full-time training director and maybe an assigned secretary. The regional office would have four to six highly qualified trainers and a small supporting staff. The home office might have 20 very skilled and widely published specialists available for training events and consultation.

What is the brand?
Is it the financial status of the home office? The height or expanse of the corporate headquarters? After the failure of many prominent life companies (most recently AIG), corporate financial strength has no credibility. But home offices persist.

The branding of companies is awful. Look at the typical agent’s business card designed and printed in accordance with home office prejudices. Does it emphasize the agent? Does it describe the benefits that can be delivered to clients? Does it place emphasis on the agent — or on the company? (Whose name is the largest and is printed in an emphasis color?) Look at the brochures developed by the companies — those that even have client-oriented brochures or pamphlets. Do they emphasize the role of the agent in helping the client select the most appropriate coverage, or do they emphasize the home office building or the billions of assets under management, which are totally inapplicable to most consumers?
Insurance company advertising is badly designed
Again, the emphasis is on the company and its favorite logos or colors, not on the services that their representatives can give to clients in making responsible and prudent moves to achieve their objectives. Excuse me, but who helps the client determine the proper amount and type of coverage — the ad department, the home office or the agent?

Want to see some great advertising? Look at all the print and electronic products of the LIFE Foundation. They focus on client’s goals and needs, and about how insurance has helped to alleviate disaster or achieve a successful conclusion. The primary focus is on client concerns; the secondary issue is the value of agent advice and service; and non-existent is the marble edifice of some home office.

Failure to understand the competition
What most life insurance companies have forgotten is that life insurance is sold, not bought. And it is sold by well-trained and well-lead agents — not by actuaries, administrators, officers and advertising. Many companies think that their goal is to surpass some other companies on the industry ranking charts. Moving up the list is their criteria of success.

However, the competition is not between company A and company B — it is the ability of the entry agent to overcome all these negative issues. This negative image makes prospecting and new client acquisition embarrassing and ineffective. Unfortunately, many candidates are turned off before making the career move, and others (in embarrassing percentages) leave the profession within two years.

Professional service is not emphasized
Companies used to proudly recognize how many of their agents held designations, were active in MDRT and held leadership positions in various financial services associations. Now many companies would much prefer that insurance be purchased in smaller (but not commissionable) shopping mall kiosks, direct mail, Internet websites and maybe even Facebook or Twitter.

What is the name?
Many years ago those who sold life insurance thought of themselves as the agents of their clients. Their primary responsibility was to the client. But the industry has revised the emphasis. The sales person is the agent of the company, and it is his or her bidding to sell, sell, sell whatever product is the “specialty du jour.” This is why there needs to be a name change.

The term adviser is far too close to that of registered investment adviser, and very rarely is there a mix of those responsibilities with the life insurance agent. The term adviser attracts the attention of the SEC and it implies a fiduciary status.
The terms planner and planning are very close to the certified financial planner — which is controlled by the CFP Board of Standards, which is cooperating with the fee-only asset managers of NAPFA in the implication that the primary function is to manage the millions of investment dollars the average consumer has, with a fiduciary status. CFP Board and NAPFA do not emphasize life insurance and they despise annuities.

Maybe those licensed to sell insurance should use the title consultant. It emphasizes a separation from the poor image of the life insurance agent. It implies a primary relationship between the professional and the client. It also implies that a reasonable fee will be charged for genuine advice and service.

The public needs help
Do not worry about the multi-millionaire — they are being well served. And unfortunately the indigent are often in that status because they are not willing to work or avoided the education and training available. However, everyone in between needs the products and related services of insurance. They need guidance in how to “spend, save, invest, insure and plan for the future” as was the original mission of Loren Dunton and our associates when we were founding a new profession, that of providing financial services professionally.

The goal of these 250 million Americans is to achieve and maintain financial independence. This requires advice and service — not giant office buildings and corporate image advertising. Advice is more critical than product. The preservation of life insurance agents can be achieved with legitimate support and training. And it requires quality insurance product — life, disability, long term care, critical illness and annuities. While the life insurance companies have lost the way, there is no reason why they cannot get back on track.

Your action plan
Evaluate the image you now present to prospects. Are you clearly and unequivocally a consultant and not an agent? Have you removed all production-related plaques, trophies and awards? Have you countered by posting items like a code of ethics, legitimate diplomas or designation certificates?