Facing Up to an Aging Producer Workforce
In this first installment of a six-part series running through the rest of 2012, we examine the issues surrounding what is perhaps the biggest problem threatening the long-term viability of the independent distribution channel, and what can be done to solve it.
At the recent Million Dollar Round Table annual meeting in Anaheim, Calif., Don White Jr., CLU, ChFC, AEP, shared a telling observation during an interview for this article: “I’m 56 years old, and I look at that audience out there [at MDRT], and I think I’m on the low side. Not hugely on the low side, but that’s pretty scary.”
It is far from the first time I’ve heard an attendee at a life insurance industry conference express this sentiment. Peer out at the audience from the main platform at just about any industry event, and heads with gray hair, white hair or no hair will dominate your field of vision.
White, who is CEO of Treasure Coast Financial Services in Stuart, Fla., actually hits the median age for a U.S. member of MDRT right on the head: 56. According to LIMRA, White is also right at the median age for a life insurance agent: 56. Meanwhile, the median age of the U.S. worker is 37.
LIMRA statistics also show the number of independent life insurance producers dropped from 163,409 in 2007 to 149,187 in 2010 and has almost certainly continued to decline since then. The total life insurance sales force — adding in affiliated agents — declined from 325,680 in 2007 to 313,001 in 2010.
Whether it is because the perception of a career as a life insurance agent isn’t sexy to recent college grads or they just aren’t aware of the opportunity it presents, it’s a simple fact that college grads just haven’t been enticed by the life insurance industry.
The Insurance Labor Market Study from The Ward Group in 2011 found 44% of insurance companies surveyed anticipated adding staff in 2012. But even in today’s high unemployment environment, where college grads are having difficulty finding full-time positions, most of those 44% looking to hire are having difficulty filling the positions.
“Despite a phenomenal 100% placement rate for risk management and insurance majors, college graduates simply do not gravitate toward insurance careers,” says Jim Hackbarth, CEO of Assurex Global, a premier network of independent insurance, risk management and benefits brokers. “Thanks to negative perceptions about the profession, a lack of awareness about rewarding careers, and a limited pool of trained talent, graduating students fill no more than 15% of the industry’s hiring needs. The tendency to overlook insurance careers by both the Millennial Generation and Gen Xers between age 30 and 51 creates an enormous challenge for an industry that anticipates a 50% workforce turnover in the next 15 years.”
It’s not a stretch to think that more than half of today’s active producers will be retired by 2027. So what is being done to attract new talent? Not enough, White says.
“As an industry, we have done a very poor job of advancing life insurance as a career,” White says. “When was the last time you saw a commercial advancing life insurance as a career? In my lifetime I can’t recall ever seeing one. Why is that?”
White wondered how many students are graduating with finance degrees and complaining that they can’t find a job. “We hear this all the time. Why aren’t we, at every single college campus, promoting this career? I don’t understand it. I just don’t get it,” White says.
“So we moan about how, ‘Oh, the life insurance industry continues to gray…’ I’ve got to believe there’s a lot of talent out there. We should just be cleaning up. They just don’t know about it. They have no idea,” White says.
White would like to see carriers advertising career positions in the mainstream media. “Maybe in the commercial, instead of talking about some product that MetLife is trying to pump, maybe what we should talk about is why you should consider a career with MetLife. You want to talk about revolutionizing. That is the direction that people should start to go — why this is such a great business. I don’t know why we don’t do it.”
Increased emphasis on mentoring
Beyond ramping up recruiting efforts, many in the industry believe an increased focus on mentoring programs can help the channel on multiple levels. It can convert the young, inexperienced agents who have found the life insurance business into successful producers who make it past those vulnerable first years. And being a mentor can be an avenue to a business succession plan for agents looking to retire.
“Our industry needs to find a way to motivate established agents to develop succession plans for their practices and mentor young agents into the business,” says Daniel Mulheran, president of Retail Life Distribution at ING U.S. Insurance. “Employment opportunities are a concern for many young people today. This is a perfect time for agents to recruit motivated, talented young people into their practice.”
Mulheran says a frequent hesitation is concern about financing a young agent or having to share commissions. The reality, he says, is that finding the right person to mentor can really pay off for everyone. “There are many opportunities to offset the cost of bringing in a junior agent. Mature agents who have robust practices with affluent and mass affluent clients have huge affinity prospect pools attached to all their client relationships — children, children-in-law, grandchildren as well as key employees of their business clients,” Mulheran says. “They can begin targeting the affinity relationships, allowing the junior agent to take the lead in helping with their insurance needs and to build their own client base. The opportunity can be significant and represents additional revenue opportunity for the senior agent through commission sharing. Further, the activity of the junior agent is likely to uncover additional, more advanced insurance needs that can get funneled to the experienced agent to handle.”
Steve Plewes, ChFC, principal of Advisors Financial Group in Gaithersburg, Md., says mentoring can create a shortcut for a young agent’s growth curve that can help him get past the critical first four years, where a life insurance career can often stall out. He is an advocate for MDRT’s mentoring program, which the organization has consciously made very accessible with lower, staggered production requirements.
“The thinking behind that is, if we can get somebody to achieve that level of production and can get them to join and come to a meeting, hopefully we can extend that four years to 14 and maybe 40,” Plewes says. “It also sets up a good scenario for building a relationship early on in an agent’s career that could provide a good succession plan for the mentor at the end.”
Along with MDRT, Plewes also praises efforts by the National Association of Insurance and Financial Advisors (NAIFA) and GAMA International. Young agents who become involved in these organizations and take advantage of the resources they provide stand a much better chance of making it through those difficult first years, he says. The mission statement of NAIFA’s Young Advisors Team says it like this:
The mission of the Young Advisors Team is to SOW the value of membership with new and young advisors, so they are empowered to SURVIVE their first years in the business, to GROW into involved NAIFA members and become successful advisors who THRIVE in the industry and our association.
And GAMA has actually managed to lower the average age of its membership from 56 to 52 in recent years, a figure credited to the efforts of GAMA’s LoTT Program, which stands for Leaders of Today and Tomorrow. Started in 2008, this career development resource for rising frontline managers is helping retention and diversity efforts.
According to James Lee, vice president of member services and marketing at the Association for Advanced Life Underwriting (AALU), about 700 of the organization’s 2,200 members are 65 or older, and about half of those are 70 or older. But the median age of the AALU member has actually dropped from 55 three years ago to 53 in 2012. Younger producers have come to the organization, realizing how important it can be in protecting the interests of their business.
Appealing to health insurance agents
Beyond simply stepping up recruiting and mentoring efforts to attract and retain younger agents, there is a prime opportunity at the moment to recruit agents working in another insurance market facing a serious threat of its own.
“Another opportunity to grow the ranks of agents selling life insurance is through health insurance agencies,” says ING’s Mulheran. “The Affordable Care Act has greatly reduced commissions to health insurance agents. These agents are making much less than they did in the past and can consider life insurance as a natural companion product.”
In a recent survey of 500 health insurance brokers by the Henry J. Kaiser Family Foundation, 74% said the Patient Protection and Affordable Care Act (PPACA) will hurt the typical broker. Indeed, the implementation of the minimum medical loss ratio (MLR) in PPACA has meant that insurance companies slashed agent commission — which had already been declining in the previous decade — in half on many types of health insurance policies. That severe change to the compensation structure means many health insurance agents are indeed looking to expand their horizons, and they don’t have to expand them very far to reach life insurance.
With life insurance coverage in America at a 50-year low, it’s hard to think it will improve much with a declining sales force that largely ignores the lower and middle classes. Don White says he can draw a comparison with a declining number of people attending church.
“The biggest problem with churches today is that no one wants to talk about converting to our religion. There’s nobody out there preaching the gospel, and nobody out there promoting the gospel. So what ends up happening is you end up with churches that just get stagnant. They’ve stopped asking people to join. We have almost an identical problem in our industry,” White says. “Churches aren’t out there preaching the gospel, it dies. Insurance companies aren’t out there preaching their gospel, it dies. It’s just that simple. And it’s really, really sad.”
By Brian Anderson for the July 2012 issue of Life Insurance Selling Magazine. Brian Anderson is the Editor-in-Chief of Life Insurance Selling magazine, and is a former editor of Senior Market Advisor.