Insurance Industry Secrets From A New Agent
So I joined an insurance company (who shall remain nameless) to embark upon a sales career and eventually become a financial advisor. I've been thinking about entering the field for sometime now ever since I left the consulting arena. After several interviews with several other companies, I accepted a position as an agent fully licensed to write life/health insurance as well as property/casualty. Now, my goal was to really see if money was being made as advertised, and to see if financial independence, working from home, setting your own schedule, etc. was obtainable.
What I've learned after 7months of learning the business and talking to other agents was quite profound. First, the basics:
I learned that it doesn't necessarily matter which company you choose to buy insurance from...be it life insurance, car insurance, home insurance, etc. Most insurance companies offer the same product at almost the same price. Sure you may pay less for car insurance from Company A this year versus Company B - but next year Company A will be more expensive than Company B. And this cycle continues until the end of time. Life insurance is pretty competitive in price across the board - it's pretty much all the same product no matter where you go.
Nevertheless, what does matter is how financially solvent your insurance company is - you don't want a weak company that can't survive downturns in the economy such as the one we're currently experiencing.
Secondly, I found that most of the financial advisors and insurance agents that I've met with and worked on deals with - are not that financially well off. Most of them have been in sales for the majority of their life and move around from company to company until they become established. They have strong pressure placed on them by the insurance company or brand they're representing, and must consistently reach high sales quotas every month. Many agents quickly get burned out, which is why the industry retention rate for agents is between 10-20%.
Unfortunately, due to this pressure of meeting high sales quotas and the fact that the agents are not that financially well off - this pressure causes agents to act unethical in some way to "do whatever it takes" to get the sale and meet quota.
But, does this translate into having the consumer's best interest in mind? With all of this pressure to meet quota, and not making a lot of money, how can the agent keep the consumer first? It's almost not possible - because the agent knows that if (s)he can't get this person to buy right away...(s)he's not sure when the next sale will come around. So there is pressure to force whatever product (which is often the cheapest product with least amount of coverage) on to the consumer. When it comes to new agents, most would like to put the consumer first and provide the best quality advice and product - but because of the pressure to hit quota, most new agents will often offer and suggest the cheapest product available...or the one that offers the most commission...such as whole life insurance.
Insurance companies put high commissions on whole life policies - which gives the agent more incentive to force the policy onto an unsuspecting consumer. Most agents, old and new, try to push whole life policies onto the consumers because of the high commissions involved. There is a huge difference between term and whole life insurance - which I state in my life insurance article.
Hopefully, one day insurance companies will offer better products for consumers (like 40, 50 and 60yr term insurance policies) and also provide an environment where agents can put the consumer first...instead of an environment that provides for sometimes unethical practices in order to get the sale.