ORLANDO – How to bring more advisors into independent life insurance distribution is a question that many have attempted to answer. One suggestion: Show them the money.
This suggestion came from David Long, the current chairman of the National Association of Independent Life Brokerage Agencies. Long’s idea would be for brokerage firms and carriers to create a way to pay recruits to stay in the independent agency system during their first 18 months or so, he proposed.
Long said an influx of new blood is needed to help alleviate the industry’s “epidemic” lack of penetration in the middle-income market, referring to the millions of Americans who are currently uninsured or underinsured for life insurance.
He elaborated on his idea for doing this during an interview with InsuranceNewsNet in advance of his remarks here today at NAILBA’s 34th annual meeting.
The idea is not part of any program at NAILBA or a formal program anywhere else, Long noted. However, he said he has been broaching the subject informally with other brokerages and carriers, in hopes of igniting interest.
“We need to take steps to attract and keep independent agency recruits for the first 12 to 15 months, or maybe even the first two years,” he said, noting that this is roughly the time it takes for recruits to get on their feet in independent agency life sales.
As for his idea of creating a way to pay recruits to stay in the independent agency system, Long provided some details.
“The brokerage general agencies would commit to recruit, house and train the new producers during that period, while the brokerage carriers would serve as the source of funding for the recruits during the same period,” he said.
For instance, a carrier would agree to pay a monthly stipend to a specified recruit during the agreed-upon start-up period.
Meanwhile, the broker would agree to send, say, 60 percent of the recruit’s production during that period to the same carrier. “This way, the carrier will get its money back,” and the recruit will have some money coming in during the often lean start-up months.
The brokerage would “require” that the recruit use that carrier during that period, he emphasized.
This is somewhat similar to the support that career agency shops give to recruits, but with adjustments tailored for brokerage, Long indicated.
The brokerage system continues to produce about half of the country’s total life production annually, according to industry statistics. If brokerage can increase the number of independents selling life insurance, this could do more than simply increase the number of Americans who own life insurance. It could also potentially increase the market share of the brokerage system.
Something needs to be done
With today’s huge uninsured/underinsured population, aging field force and continuing decline in numbers of life insurance producers, something must be done to increase the ranks of trained life insurance agents in brokerage, Long said.
“We’ve all been chasing the one-percenters,” he said of the sales climate in recent years. That has resulted in the middle-income market being underserved. Meanwhile, the average age of advisors has climbed to around 60. These agents can’t afford to go after the mid-market since they need to focus on serving their existing clients, Long said.
The direct writers have taken up some of the slack by writing some of the mid-market business, he allowed. However, there are still many Americans who have no coverage.
The online life insurance websites do get visitors, he noted, but “we still need someone to drive (customer interest in buying) to a close.” That someone is an agent or advisor, he maintained.
The problem is, there just aren’t enough agents in the industry to reach all the interested buyers, so the sales don’t happen as often as they could and should, he said.
Long said he hears much the same concern when he talks to people at other brokerages. In addition, he hears about how hard it is for agents to earn an income in the early months. Some of this has to do with greater difficulty in reaching people. He pointed to Caller ID as a barrier. “People no longer answer their phones if they see on their Caller ID that the call is coming from someone they don’t know.” As a result, some firms say they need more leads than they did in the past.
Even when a new agent does submit an application, he added, the agent may have to wait several weeks for underwriting and policy issue before being paid.
“Without money coming in, some recruits end up starving,” Long said. “Some go broke and leave the industry.” That’s not a new problem but it’s more critical now in light of the smaller size of the overall field force and the huge size of the uninsured market.
“If we don’t do something to rebuild the independent agency ranks, there won’t be anyone left,” he predicted.
Research shows there are plenty of consumers who are interested in owning life insurance, he said. “But life insurance has to be sold, so what we need now is more advisors and agents to sell it. These need to be people who know how to close.”
Long is senior vice president at CPS Sacramento/Long Insurance Services, an independent brokerage general agency in Sacramento, Calif.
InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].
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