A Hot Job for Hard Times: The Life-Insurance Agent

The Wall Street Journal

One of the most old-fashioned occupations in finance is back in favor: the life-insurance agent.

Some big insurers are adding thousands of agents and planning to sign up more. They're taking advantage of the weak job market to scoop up former real-estate agents, mortgage brokers, bankers and lawyers whose prospects have declined.

New York Life Insurance Co. added 3,618 agents last year. Northwestern Mutual Life Insurance Co. signed up 2,340. In Texas, a start-up with big-name backers opened in January with 2,200 agents and plans to double the number in three years.

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It is an unlikely resurgence. Life-insurance agents, once an all-American type often portrayed in movies and television shows, underwent their own downsizing in recent decades. Companies deemed agents too expensive to recruit, train and subsidize in their early years, after which many soon gave up and left. Companies that once had armies of 10,000 to 20,000 agents began to rely increasingly, instead, on financial advisers, stockbrokers, banks and the Internet for sales.

Then, life-insurance agents' mainstay product, known as whole life, suffered a black eye, both from a scandal over the way some agents sold it and from a widespread view that it wasn't a very good investment.

The economic crisis turned things around. Many ordinary people lost heavily on stocks, making whole-life policies look better. That created an opportunity for insurance companies, some of which are now aggressively pursuing it by signing up new agents.

This coincides with a job environment that has many Americans adjusting their career aspirations to match the bleaker economy, considering work they might have passed up before.

Many discover that selling life insurance "is one of the most challenging careers you can take on," says former agent Connie Staton, a "sunup to sundown" job of seeking out and meeting with potential customers, along with attending required educational sessions. Ms. Staton, 68 years old, quit the gig in 2007 after seven years, concluding that "the pay versus the hours didn't match."

Seventy percent of agents earn less than $35,000 in their second year, according to industry research firm Limra. Fewer than 20% of new agents are still on the job after four years.

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Robert McCarthy, 32, gave it a shot after losing his job as a national sales manager of a residential-mortgage firm in Florida when it closed in 2007. His own agent at Northwestern Mutual suggested he try selling life insurance.

Though he would get some money from the company as a training allowance, he knew he would rely on commissions. Most agents are independent contractors, not employees.

But Mr. McCarthy liked the Milwaukee insurer's mentoring efforts and program for helping new agents develop business, and the company's 150-year-plus history gave him comfort. After hours of talking it through with his then-pregnant wife, he signed up.

Mr. McCarthy is now beginning his third year at a Northwestern Mutual agency in Washington, D.C. "It's a challenge, for sure," he says. But figures from Limra suggest that if he can survive the grueling first years, he stands a good chance of earning $113,000 to $134,000 after his fifth year.

The role of the life-insurance agent today is more complex than the image built up years ago by books and shows such as "A Tree Grows in Brooklyn," in which an agent passes along gossip as he makes the rounds, and the television sitcom "Father Knows Best," with Robert Young.

The 1980s brought a proliferation of mutual funds, giving families an alternative way to put away money for the future, and term-insurance policies, with lower premiums. For agents, the lower premiums also meant smaller commissions. And consumers soon began pricing term insurance on the Internet to find rock-bottom rates.

With costlier whole life already harder to sell, this traditional type of policy was hit by a scandal in the 1990s. Whole life is insurance combined with a type of savings account. Unlike term life, which protects for a set interval, whole-life policies pay off no matter when the death occurs. The insurer pays interest on the savings portion of the policy, which grows tax-free as long as the policy is in force. Buyers can withdraw some of this money tax-free.

In the 1990s, some agents talked existing policyholders into expensive upgrades. They told customers that interest on the savings accumulated in their policy would pay the higher premium on a new, larger policy.

Customers didn't always understand that if the interest the insurer chose to pay on their savings declined, it wouldn't cover the new premium, and policyholders would face bills they might be unable to afford.

The resulting claims from unhappy policyholders cost billions of dollars in settlements for insurers, which also faced the cost of upgrading their training and compliance programs.

On top of that, their business mix was changing. Some companies required that agents obtain the extra licensing needed to sell mutual funds, or leave.

The result was a big outflow. Prudential Financial Inc.'s fleet of U.S. agents sank to 2,450 from a peak of 20,000. MetLife Inc.'s fell to 8,000 from 14,000. In all, the number of U.S. life-insurance agents affiliated with a specific company today is down nearly a third since the 1970s, to 174,000, according to Limra. Their average age is up to 56.

One factor turning this around is the way insurers' core product, whole life, came through the financial crisis. Competing term insurance, priced much lower, was sold on the pitch "Buy term and invest the difference." But when stocks plunged early on in the financial crisis, "invest the difference" sometimes meant "lose the difference." By contrast, money paid for whole life was still there.

Term-life sales were flat in the second half of 2009, according to Limra, while sales of whole-life policies were up 12% from a year earlier.

Whole life, given its complexity, generally isn't sold via the Internet, but needs an agent to explain it. So now the insurers that specialize in whole life are capitalizing on the more positive light in which it is viewed, adding agents.

These insurers are predominantly the old-line mutual, or policyholder-owned, companies like Northwestern Mutual and New York Life. Mutuals are better-positioned to sell whole life because, having no need to reward public shareholders with dividends, they can give more of their earnings to policyholders.

However, a Texas start-up called Insphere Insurance Solutions aims to profit from what it says is a shortage of agents calling on small businesses and middle-income families.

"When I came into the business in 1974 as an agent, there were in excess of 50 companies that religiously hired and trained new agents each year," says Insphere President Phillip Hildebrand, a former New York Life executive. "Now there are roughly just a dozen that are seriously committed" to developing agents. Insphere is backed by investors including affiliates of Blackstone Group LP, Credit Suisse Group and Goldman Sachs Group Inc.

Signing up new agents won't guarantee a sales surge. Though most new agents have potential customers among their friends, family and former work olleagues, to have a sustainable career, the agents must reach the point where those people refer their own friends. Some rookies never do.

When Antonio Accardo discussed a job with Massachusetts Mutual Life Insurance Co. in 2008, he realized he had a valuable asset for an agent: his family's San Francisco restaurant, Villa Romana Ristorante Italiano. Many of its patrons have known Mr. Accardo, who is 37, for years, and they now pepper the new MassMutual agent with questions about financial matters, he says.

Like many of today's recruits, he is well-educated—with a master's in business—and is also licensed to sell mutual funds and certain other investments. Insurers say new agents' chances of success are better now than in the past because the tough job market means professionals with large networks of contacts now are game to sell insurance.

The new agents at Guardian Life Insurance Co. of America include Steven Flanders, 45, an attorney who founded and sold a marketing firm. He now wears an orange bracelet reading "Create Value," recommended by a motivational speaker at his agency, in New York.

Mr. Flanders says the bracelet reminds him to give clients good financial advice even if this means he may not get an immediate sale; that way, the clients will be more likely to speak highly of him to their friends if the topic of insurance comes up.

In a sign of success, Mr. Flanders has moved up to an office from a cubicle. Still, the job is "very hard," he says. "People are more willing to confront a doctor about their physical infirmities than they are a planner" about defects in their financial portfolios.

Time after time, people say, "I don't want to focus on this right now," he says.

Recruiting agents is a big investment. Insurers spend tens of thousands of dollars for each one in the initial years, on things like income subsidies, medical benefits, support and training. "We know investing in agents takes a while to pay off," says Mark Pfaff, a New York Life executive.

Some help recruits by passing on a "book of business" from an agent who has retired. Even so, success for the recruits is squarely on their own shoulders.

Catherine Calise, 48, joined New York Life last June after the housing slump brought an end to her 18-year career as a real-estate agent in Connecticut.

She regularly hauls a card table to the loading dock of a freight company to greet workers with brochures. She fills her calendar with Chamber of Commerce and other networking events. She treks through shopping strips to meet storekeepers. She has even gone house to house knocking on doors.

"You have to step a little out of your comfort zone," she says. "I'll be in line at the grocery store, picking up dry cleaning, grabbing an iced tea at Starbucks, and I'll be prospecting the person next to me" by striking up a chat.

Ms. Calise won the "rookie of the year" sales award for 2009 for her Southern Connecticut office, where some of the 22 hires she began with have quit. "Those who dropped out weren't really applying themselves to the fullest," she says. "They didn't have the passion or the desire."

Write to Leslie Scism at leslie.scism@wsj.com

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