Summary
The inability for life insurance advisors to obtain qualified prospects has resulted in the industry losing net advisors at an alarming rate for the last decade.
The future belongs to the organizations that master lead generation. That can come from any distribution system but will be driven outside the actual insurance company itself.
Analysis
The life insurance industry for the past two decades (or maybe even longer) has been battling declines in the number of agents selling products. This has been driven mainly by the telecommunication revolution that has made cold calling obsolete. Life insurance agents sell a product that is not required to be owned like auto, home and health so they must create demand.
The traditional career companies have seen steady decline in the number of agents in the past two decades. Prudential how once had an army of over 30,000 agents has just 2,000 company agents today. Now, Prudential has also sold product through brokers so there sales have not completely fallen off. But the inability to bring new agents into the business has trumped all the companies. As a result the insurance companies are getting there sales from a dwindling number of aging agents. The average age of the typical insurance agent today is pushing 55.
With fewer agents the companies are forced to make their products more and more competitive and at a higher average compensation rate then they would if they had a larger pool of agents. The products are becoming less profitable over time because of the decline in the agent ranks.
So the future belongs to those organizations (not necessarily insurance companies) that invest in lead generation capabilities. Once a qualified lead source is developed you can then recruit agents to a system who will be able to sell products. The upfront investment now needs to be in lead generation and not training. Training will come once the agents survive the very difficult process of starting a career as an insurance agent.
Distribution models in place today will remain, such as traditional brokerage, career agency, bank distribution and PPGA but none will experience substantial growth with out bringing in new agents. However, without a continuous source of leads they will not be able to survive the very agents they are bringing into the business.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
