In a move to boost the number of insurance agents and make licensing exams easier to pass, life and annuity industry groups are asking states to update licensing rules and remove unnecessary barriers.
In a joint 10-page work plan that addresses what they said was “increasing concerns about agent recruitment, retention and diversity,” the American Council of Life Insurers, the National Association of Insurance and Financial Advisors and FINSECA, call on state regulators and legislators to remove outdated and now irrelevant features of the licensing requirements and processes.
“Requirements that constitute unnecessary barriers or that no longer serve today’s regulatory environment should be identified and removed from the producer licensing process,” the workplan said.
The groups said there is a shared objective to bring greater uniformity and efficiency across the producer licensing process, not only to support individuals of underserved and underrepresented communities but also to encourage insurers and agency leaders to make greater investments in recruitment, training and retention.
Agents and other industry representative have complained for years about licensing procedures, which haven’t change much in decades. Furthermore, licensing requirements can vary greatly from state to state, discouraging recruitment and growth.
Exam is 'challenging'
“It has been challenging for many of my potential agents to pass the life producer basic exam,” said Dr. Malinda Williams, a personal and financial coach. “There's a disconnect between learning and comprehending the material to pass the basic exam. If the licensing exam is convenient and easier to pass, this will not only increase the passing rate but it will improve the ratio of individuals desiring to change careers in one of the greatest industries.”
Learning the business of servicing clients is the bigger challenge – not the exam, she said.
“The learning has to be put into application,” she said.
Others agree on the need to upgrade licensing exams.
“I believe the current insurance exam is extremely difficult to pass and I experienced a lot of trouble with it during my attempts,” said Tim Connon, founder of ParamountQuote Insurance Advisors. “The questions on the exam are intentionally there to throw you off and some questions don't even have proper study notes to follow. I think the insurance exam should be much easier to pass than it is.”
The trade groups focused on six specific areas of current licensing issues including background checks and waivers, standardization, declining producer exam performance, and online access to exams, among others.
'More to be accomplished'
“While there has been progress in recent years, there is much more to be accomplished,” the workplan said.
Anthony Martin, founder and CEO of Choice Mutual, in Reno, Nevada, said it is important that the licensing exams adapt to the changing environment.
“We can take advantage of technology to make training programs and licensing procedures a lot more convenient,” he said. “What will make it easier for aspiring agents is to choose a type to specialize in. That will boost expertise over time and simplify learning and knowledge.”
The pass rate for insurance exams is around 60%, industry executives said, even though an applicant must get a grade of just 70 to pass.
“Each state measures on a sliding scale based on the difficulty and value of the questions,” said Brad Cummins, owner and principal agent of Insurance Geek, in Charlotte, North Carolina. “Many groups are calling for this to be changed. The test scoring system should be more standardized, and the test should have equal amounts of difficult and intermediate questions.”
Others criticized the lack of statewide standards.
“One thing that I think should change is the requirement that if you hold a license from one state, you need to take another exam to get licensed in another state,” said David Lewis, owner of Monegenix, a digital life insurance agency in North Carolina. “Certain licenses like teaching, medical, and cosmetology, can be transferred from state to state. I'm not sure why the same isn't true for insurance licenses.”
The trade groups are most concerned about improving training and retention rates within the industry.
“Over half of current producers are 55+,” the workplan said. “And research conducted by LIMRA reveals that many expect to consider a business transition plan in the next ten years, leaving uncertainty in the workforce.”
Retention estimates sit “at a mere 14 percent after four years,” the workplan said.
“Encouraging strong support systems for new producers can ensure more of them transition into lifelong practitioners. Additionally, improvement in onboarding and increased access to peer support groups, either internally or through industry association membership, has substantial potential for driving change,” the report said.
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].