Saturday, August 9, 2008

Where Will We Get New Life Insurance Agents?

And, who will sell our products? Those are the big questions that will plague the insurance industry in a few years.

There is a fascinating article on this topic in the August 2008 issue of InsuranceNewsNet Magazine entitled “Is Wall Street Killing Life Insurance?” Here are some key statistics from the article:

  • More than 40% of the U.S. adult population has no life insurance whatsoever.
  • From 1985 to 2006, the number of life insurance policies sold declined by 39%, while the number of households with children increased by 19%.
  • There are 11% fewer producers today than twenty years ago. Some industry analysts say the number of producers could drop by 40% by 2017.

The article notes that the cause of these issues is that Wall Street does not reward investment in distribution. Insurance carriers have boosted profits by cutting their expenses related to developing tomorrow’s producers, and Wall Street has rewarded them with higher valuations.

Alternative distributions systems, such as banks and direct marketing firms, are not selling substantial amounts of life insurance. In the meantime, our country’s agent force is aging and shrinking. Get this: “Thirty years ago, the median age [of an insurance agent] was 38. Now it’s 53 and going up at the rate of one year every year. Half of the active producers today will retire over the next 10 years.”

Many industries will face a crisis finding workers in the future as our country’s entire workforce ages. But, the insurance industry looks like it will have even bigger problems than most simply because, as an industry, far too few organizations are even attempting to bring young people into a career selling insurance.

Of course, starting an insurance career from scratch has always been extremely difficult. It will be a shame for our country, however, if the general population becomes more vulnerable to financial risks as a result of the insurance industry’s underinvestment in future distribution.

How do we fix this problem?

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