The 4 biggest dangers facing life insurance producers today (and how to overcome them)

By Barry Goldberg

Independent Life Brokerage

During these historically challenging economic times, how does a successful life insurance agent thrive? We have identified four dangers facing agents and the associated strategies to overcome them. Understanding how to navigate through these challenges can be the difference between success and mediocrity.

Selling life insurance has never been considered easy; however, in today’s economy, it could be considered nearly impossible. With an increase in competition and an overall slowing in sales of life insurance policies in recent years, producers are finding it more and more difficult to grow their business.

According to the American Council of Life Insurers, over the past decade, sales in the life insurance industry have reached a plateau, and yet there seem to be more and more competitors selling it.

Years ago, life insurance was generally only sold through an insurance agent. In today’s world, professionals such as attorneys and CPAs are adding life insurance to their repertoire of services offered. A driving force behind these additional players in the life insurance realm is the increasing baby boomer population. Consisting of roughly 26 percent of the U.S. population and an estimated purchasing power of $2.3 trillion, baby boomers are a strong force in the insurance marketplace.

As baby boomers age, they are looking to purchase multiple insurance-related products from smaller practices who offer not only a variety of products, but expertise as well.

Yet another emerging trend is that many consumers are choosing to bypass the traditional producer model by purchasing a policy online.

During these historically challenging economic times, how does a successful life insurance agent thrive? We have identified four dangers facing agents and the associated strategies to overcome them. Understanding how to navigate through these challenges can be the difference between success and mediocrity.

Danger No. 1: misunderstanding the changing marketplace

Consumers today are saturated with advertising messages. A recent study found that the average individual is exposed to 3,000 advertising images per day, but only 30 of those images reach the conscious mind. With so many new competitors in the marketplace, life insurance has become the latest victim of over-advertising. An abundance of competitors and advertising has led to the commoditization of life insurance. Carriers are now forced to compete with razor-thin profit margins and many advisors are forced to sell based on price rather then value.

With so much clutter and a concentration on price, it’s easy to see how reaching the consumer has become such a difficult undertaking. Choosing a sales strategy that will break through the clutter and illustrate added value is necessary for an advisor’s survival in today’s economy.

Finding niche markets and learning new benefits that carriers are adding to policies can help an advisor differentiate themselves from the competition. The only hurdle standing in the way is the amount of time it takes an advisor to accomplish this.
Danger No. 2: mismanaging the time crunch

Most producers feel they spend a good deal of time prospecting and selling and very little time on low-value activities such as administration. The reality is quite the opposite. The average producer spends over 80 percent of their time on account administration, travel and other non-value-added activities. Roughly 20 percent of their time is actually spent on revenue-generating activities such as prospecting and selling. Administrative activities such as paperwork, returning calls and shepherding a case through underwriting are absolutely vital tasks, but are often an enormous waste of time for a producer.

Danger No. 3: Not keeping up with regulatory and product changes

If it seems like the amount of regulatory changes in the life insurance industry are increasing at the speed of light, that’s because they have been. The life insurance industry is part of a universe of nearly 270,000 law and regulation items. Keeping up with all of the regulatory changes is imperative and necessary for a producer’s survival. Falling behind on newly released state and federal mandates could spell disaster to their livelihood.

Added to that are the increasing number of product and premium changes carriers have been implementing to stay competitive with one another. An ever changing regulatory and risk environment means an additional burden of time, uncertainty and liability for producers.

Danger No. 4: reputation

Reputation is everything to the success of an advisor. Satisfied clients are more likely to refer their friends and family, thus bringing in additional prospecting and selling opportunities. Taking the time to thoroughly understand a client’s needs and desires from the start is imperative when developing the solutions they demand.

Unfortunately, today’s price-driven economy forces many advisors to use a tactical approach to placing a case. The classic tactical approach involves an informal application which is submitted to multiple carriers. The most aggressive bid is then brought back to the other carriers for a competitive bid.

According to LIMRA research, 88 pecent of informal applications never actually get placed. Oftentimes, an advisor's reputation can easily be blown when a client’s case is not placed as a result of the tactical approach being utilized.

Creating a strategic approach for each client, rather than using a general approach, will result in placing a higher percentage of cases and will generally get those cases approved with standard or better ratings. Utilizing a strategic approach can equate to the start of a life-long relationship with a satisfied client.

Changes in the marketplace, mismanaging time, staying on top of regulatory and product changes and a tainted reputation are all very real dangers threatening a producer’s success.
Fortunately, there are proactive steps and strategies to overcome these dangers:

Step No. 1: add value

Deliver real solutions to meet the client’s financial concerns. Start by gaining a complete understanding of the client’s goals and desires, which will help you to craft a truly customized and unique solution for the client.

Keeping the client informed along the journey of case placement is critical. Let the client know that you are working hard for them and they will feel like they aren’t just another commission check for you. Of course, adding value goes hand in hand with the burden of added time. Agents who are able to delegate time consuming administrative tasks will enable themselves more time with their clients.

Step No. 2: strategic mindset

Delegating administrative duties is a simple solution for an advisor whose time is bogged down by low-value-added activities. If a majority of the critical and necessary administrative activities were shifted away from an advisor, they would have more time for revenue producing activities such as prospecting and selling. This reallocation of time can mean tens if not hundreds of thousands of dollars generated from relationships with, and referrals from, your most valuable clients.

Step No. 3: negotiate skillfully with underwriters

A very real concern of most producers is dealing with underwriters when trying to place a non-standard case. The most successful strategic approach begins with a well prepared presentation to the underwriter and includes an explanatory cover letter outlining all necessary medical and financial issues.

Establishing goodwill with underwriters is extremely important to getting a case placed with little issues and in a reasonable amount of time. Therefore, building relationships with underwriters at each carrier can be just as important as building relationships with your clients.

In closing, today’s economic environment consists of very real challenges to the life insurance industry. However, following the steps outlined above can quickly mitigate many of the challenges and pitfalls agents face.