The retail life insurance industry is not an easy industry to break into or succeed in. According to the Bureau of Labor Statistics (BLS), there were over 385,000 life insurance agents in the United States in 2016, and by 2022, another 45,900 will enter the market. With the U.S. population just over 325 million as of December 2017, the size of the life insurance industry provides one agent for every 844 people. This highly competitive environment is conducive to filling America’s life insurance needs, but it can prove to be a tough environment for an agent who typically makes a living on commissions from sales.
The burnout rate for life insurance sales agents is high. More than 90% of new agents quit the business within the first year. The rate increases to greater than 95% when extended to five years.
Life Insurance Agent Salary
Several factors cause so many life insurance agents to leave the business. The most common is they simply cannot make a living. The vast majority of life insurance sales jobs are straight commission. That means no base salary—not even minimum wage—and no benefits. Employers get away with this by classifying their sales reps not as staff employees but as independent contractors. As such, putting in a full week’s work does not guarantee a full week’s pay, or any pay at all. You could work in excess of 40 hours, but if you do not make any sales, you get no paycheck that week.
A few companies do offer their sales reps employee status, which comes with a small base salary and benefits. Agents at these companies are held to rigid production quotas, however. Miss your monthly sales target more than once or twice, and you could be shown the door.
Why Agents Quit
Something else many agents cannot handle is the grind. Finding prospects is difficult, even with harnessing the power of the internet. A lot of insurance companies recruit new agents with the promise of abundant leads, but once they’re on the job, these agents find the leads are nowhere near as plentiful as the company suggested. Agents who are given leads by their employers almost always earn lower commissions in exchange. Company leads have a reputation for being difficult. When new agents quit, their managers often redistribute the leads they were assigned to the next batch of new hires. By the time you get your first stack of company leads, they may have been called by a half-dozen ex-agents already. (For related reading, see: Best Ways to Find Life Insurance Leads.)
Exclusive leads, when you can find them, are very high in price. Your close rate, meaning the percentage of leads you actually sell, has to be phenomenal just to break even with exclusive leads.
For these reasons, many life insurance agents drum up business the old-fashioned way: cold-calling and door-knocking. These methods still work, even in the 21st century, but they require a lot of perseverance and very thick skin. Even the best salespeople in the world hear the word «no» much more than they hear «yes.» Rejection is a huge part of the job, and you must embrace it if you are to be successful. Many leads hang up the phone or shut the door in your face before you can even begin your pitch. If rejection gets under your skin or wears you down, life insurance sales is not the right career for you.
Selling Life Insurance
Compared to most products and services, life insurance is a hard sell. Consider what happens when a prospect visits a car lot. First, he parks the old heap he desperately wants to replace. Next, after a cursory introduction from the salesperson, he climbs behind the wheel of a new car, takes in the new car smell, and admires all the gadgets and features his present vehicle does not have. He starts it up and drives it around the block, making mental notes of the quiet, comfortable ride and superb handling. All the while, the salesperson conducts psychological judo from the passenger seat, ensuring the prospect that for a low monthly payment, he can be done with his old car and upgrade to this superior driving experience in minutes.
Similar scenarios play out daily at timeshare resorts, boat dealerships and high-end electronics stores. The presence of an enticing product the customer can see, touch and smell makes the salesperson’s job much easier and often leads to an impulse purchase by the customer. Life insurance, by contrast, offers no such instant gratification. In fact, it provides no gratification or benefit whatsoever until the prospect is dead. Simply getting your prospect to acknowledge and discuss the fact he is going to die is a hard first step. When and if you clear that hurdle, your next task is creating a sense of urgency, so he buys right away. Leaving the appointment without signed paperwork almost always means you have lost that prospect forever. The client may be sincere when he says he will think about it, but chances are he will not give it five minutes of thought after you walk out the door.
On the Bright Side
OK, now for the good news. Selling life insurance offers a few benefits difficult to find in other careers.
Benefit #1: Easy Access
First, becoming a life insurance agent is easy. No educational requirements exist beyond a high school diploma. Some states require you to take a licensing course and pass an exam, but truthfully, these are relatively easy.
Benefit #2: Job Prospects
Second, life insurance sales jobs are abundant. The online job search sites, such as Monster.com and craigslist, are full of them. If your resume is posted on a site such as LinkedIn, you may even be contacted by firms looking to swell their agent ranks. Because most companies offer commission-based pay with no guaranteed income, they have no incentive to limit hiring. They offer jobs to anyone interested and hope a small percentage become productive agents. Most companies even reimburse you for the cost of obtaining your license after you sell a certain amount in premium dollars.
Benefit #3: The Money
By far, life insurance offer the largest commissions in the insurance industry. The typical first-year commission for an auto insurance policy is 10% to 15% of the premium. For health insurance, it is up to 7%. Life insurance often pays 100% or more of the premium. This means if you sell a policy with a $100 per month premium, you make a total of $1,200 in commission on that policy during the first year.
In addition to high commissions, some life insurance companies advance their agents six to 12 months of commission on a policy rather than making them take it as earned. On that $100 per month policy, with a six-month advance, you receive a check for $600 the day the policy is issued. The downside occurs if the policy lapses before six months pass; if that happens, your employer charges back the unearned portion of your advance.
Benefit #4: Passive Income
Best of all, as a successful life insurance agent, you can make a lot of money down the road. In addition to the immediate commission you earn from selling a policy, you get paid renewal commissions on that policy for as long as it is in force. A whole life policy purchased by a 30-year-old who lives to be 90 and keeps the policy his entire life pays you commissions for 60 years, for example. Your commission percentage on a policy drops after the first year, but you keep earning 5% to 10% as long as the policyholder pays his monthly premium. This is passive income you receive each month without even having to get out of bed.
Many life insurance agents who have been in the business 20 years or more have enough renewal commissions built up to make an excellent living without ever having to sell a new policy.
How to Become a Successful Insurance Agent
To sell more than competitors do, life insurance needs to be on an agent’s mind at all times, and the proper amount of preparation needs to be completed before each client sales meeting. An agent should consider what the individual client’s needs are before the meeting and direct his language in a manner that relates the client’s needs to the benefits of the products. This way, the client fully understands how the policy fits into his life and how the insurance agent has tailored the policy’s structure to fit his circumstances. For instance, if a client previously told an agent that his family was looking to expand with another child in a few years, the agent should explain to the client how the policy is structured with a new baby in mind.
The sale is easier once the client completely understands the benefits attached to the agreement, the new sense of safety and security offered to the client’s family, and the empowerment experienced by purchasing a contract as a means of showing others how he cares about protecting their personal finances.
Without wielding a sense of unrelenting interest, intrigue, excitement and urgency toward the needs others have for life insurance’s long-term, protective benefits, a life insurance agent is unable to communicate the most important message to clients, which is that life insurance offers more than another bill at the end of the month or year. (For relate reading, see: Life Insurance: How to Get the Most out of Your Policy.)
The direction and precision of messages delivered to clients is key when an agent begins the dialog with a future client. The message, whether verbal or written, needs to communicate that those who are interested in solidifying the sound performance of their financial affairs should use life insurance as a means to that end. The message clients receive should be that life insurance exists on the same important level as stocks and bonds. A professional understands the products to the point that the reasons given are sound.
To improve communication skills, agents can practice delivering their product explanations in front of a mirror, record themselves and listen to how explanations of products sound, and prepare retorts to common objections by clients. (For related reading, see: What are some training and development techniques used to improve interpersonal skills?)
Confidence Is Key
Confidence plays a large part in an agent’s ability to deliver the right message to the person. Professionals are highly articulate and able to cater their messages to their audience. Without having spent enough time thinking about the ramifications of going without insurance and making real the potential losses, an agent is unable to explain in a convincing manner the impact of those losses.
Maintain Energy Levels
Since the industry is highly competitive, effort, energy and stamina are key. An agent certainly does not make a sale with every individual or business he approaches, and for this reason a high level of motivation is critical. Most agents find their own sales opportunities rather than having a company pass along interested clients. To keep a constant flow of names available, and to avoid spending too much time with individuals who are perhaps being polite but are uninterested, a successful agent needs to implement a sound method of finding fresh ears for an insurance discussion.
An agent’s beginning years may require weekend hours, later hours during the week and trips to clients who do not purchase an agreement or need to be met for non-income-producing reasons. The lifestyle of an agent is not conducive to a typical 40-hour work week. To consistently deliver new avenues of leads to counteract the high rejection and pass rate, an agent needs to seek out new opportunities as if the old ones did not happen.
Be Exemplary in Client Interactions
Professionals working in the industry make sure their name and job title is remembered long after they talk to or introduce themselves to potential clients. An agent’s personality needs to be large enough to be kept current in the mind of a client without being offensive. Interpersonal skills and relationship-building, on top of competency with products and stamina, are extremely important. Successful agents show themselves as being capable, trustworthy and stable in addition to being experts in their field.
The agent who meets a potential client should bring something important and urgent to the client’s attention without placing too much pressure or appearing aggressive. This is a difficult talent to master; when gauging interactions with future clients, be tasteful, use common sense and be sympathetic to others’ needs and emotions. Do not be offensive or pushy.
Get Others to Talk About You
Referrals are a large part of building a book of business that stands on its own. The ideal situation arises when interactions with clients have been so positive that they, without the coercion or request of the agent, go out of their way to recommend the agent’s services to friends, family and co-workers. The most powerful source of marketing is word of mouth from an influencing voice, and the best part is this form of marketing is free. The interactions between the agent and the client should be good enough that the client wants to brag about «my insurance agent» to others. Sometimes just being extremely nice to a person serves as a catalyst. (For related reading, see: How to Get Referrals.)
Independent insurance agents, also known as insurance sales agents or «producers», typically sell a variety of insurance and financial products, including property insurance and casualty insurance, life insurance, health insurance, disability insurance, and long-term care insurance.
Property and casualty insurance agents sell insurance policies that protect individuals and businesses from financial loss resulting from automobile accidents, fire, theft, storms, and other events that can damage property. For businesses, property and casualty insurance can also cover injured Workers Compensation Insurance, product liability claims, or medical malpractice claims.
Independent insurance agents typically represent a number of insurance companies, or «carriers», and sell the products that most appropriately meet the needs of their clients. Independent agents typically are very well trained and knowledgeable of the complexities of the insurance market and insurance law. Their expertise allows them to advise their clients about appropriate amounts of insurance and insurance coverages for their particular needs. Often, independent insurance agents will work with insurance intermediaries, who obtain quotes from multiple insurance providers and pass them off to the independent agent. Working with an insurance intermediary service allows the independent agent to review many quotes and offer their clients the best policy options available. For their efforts, independent agents are paid a commission (remuneration).
In addition to insurance policies, agents often sell mutual funds, annuities, and products that address wealth management, retirement and estate planning. Independent agents must be licensed by the states in which they sell insurance and financial products.
There are a number of major trade organizations that support the interests and needs of the independent insurance agent, including Agents For Change, The National Organization of Life and Health Agents (NOLHA), the Independent Insurance Agents & Brokers of America (The Big «I»), and the National Association of Professional Insurance Agents (PIA).
Independent agents are independent contractors for the insurance companies they represent. Several companies may authorize the agent to sell for them, but the agent remains an independent businessperson. While the agent collects commissions, they do not collect a salary from the companies they represent. On average, independent agents work with thirteen property and casualty and six life and health insurance companies on a regular basis.
Independent agents own and control their accounts, policy records, and renewals. If an independent agent’s contract with a particular insurance company terminates, the agent retains the rights to active accounts and may place them with another insurer.
Competition exists between exclusive agents and independent agents. Exclusive agents, who are salaried employees of the insurance company, write a majority of the personal lines business. However, because of the complexities involved in commercial risks, independent agents capture approximately 80 percent of the commercial lines market. It is having access to multiple markets that gives independent agents a competitive advantage in commercial lines.
To add to an independent agent’s competition pool, many insurance companies are direct competitors to the agents they appoint. For example, Progressive Insurance spends nearly $300 million a year in advertising directly to the public. Yet, Progressive is the country’s largest writer of private passenger auto insurance through the independent agent distribution channel.