General Life Insurance Topics

Why Is It So Hard to Sell Life Insurance?

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As I sat listening to a life insurance agent recruiter who came to my home upon the referral of a dear friend of mine, I thought, who in their right mind would not want to become a life insurance agent. He was well dressed,  very articulate, extremely confident, flashy wristwatch, quite athletic looking, walked with a confident air, and driving a brand new Mark IV lincoln. He spoke of golfing, fishing trips to Alaska, musical concerts, eating at fine dining establishments, annual tickets to Phoenix Suns and Roadrunner basketball and hockey games, company-paid trips to Hawaii, Mexico, French Riviera, Disneyland, and a home with his own swimming pool. He spoke of income potential limited only by my ability to dream and of freedom from someone else determining my success or failure. He talked of the camaraderie felt for others in the agency I would be working in and their willingness to help me be successful. He assured me that if I would follow his training, instructions, and direction–nothing deviating–all these things could be mine. 

 

After painting this vision of grandeur he then said, “Your chances of obtaining these things is less than 1 in 10.” What a heavy boot came crashing down on my inflated balloon of success. How can that be? Aren’t these the things people dream of as they set the course for their financial journey? What could possibly derail this dream or rob me of living this way?This manager had been around long enough to know the truth and reality of both sides of the painting. He was a man of integrity who knew both sides of this picture had to be painted. Both were possible and therefore he could speak confidently of the good times and speak honestly of the bad. 

Industry wide statistics showed he was correct that the success rate was an abysmal 10% of those who signed on to be a life insurance agent having any degree of success in the business. In fact, Investopedia reports on their website https://www.investopedia.com/insurance/becoming-life-insurance-agent  90% fall out the first year of employment and if extended to 5 years it grows to 95% drop out. It has also been observed out of those five left only one of them will be able to sustain a household without a second income.  

Why is it so hard to sell life insurance? Let’s take a brief look at some interesting insights into that question.

Job vs. Business Mentality

This profession is easily misunderstood by those who want to be part of it. So many are recruited to the potential fruits of it that they don’t come into the business with the understanding they aren’t going to get much immediate satisfaction from their labors. Most don’t grasp the impact that negative responses to their good intentions will have upon them. Most people are not built to withstand the rebuffing an insurance agent must endure in order to make a sale. They cannot grow enough scar tissue on their egos to withstand such treatment.  They also find an incredible amount of rejection when they respond to the inevitable “what do you do for a living” question normally asked in social settings. Not many want to delve into an extended conversation since it normally leads them to having to expose their vulnerability for the uncomfortable dilemma of having to engage or disengage the services you provide. You quickly find there are very few if any social venues where your profession doesn’t have an impact on the conversation. The very lifeblood of your business is gathering prospects for your services, which requires you to always be looking for opportunities to present your story–so you are not easy to be around. 

Since most life insurance sales people are commission only or a very small stipend to begin with, they usually run out of financial resources before they see the fruits of their labors. Even when a sale is made, it can be up to 90 days before you can access your commission. Unless you have a savings you can use to cover your expenses, or a spouse’s income you can tap into, you are vulnerable to what causes most businesses to fail. You are undercapitalized and cannot weather the financial storm you must go through in order to succeed. It was truthfully spoken by a very successful insurance agent that the secret to success in the insurance industry for the first three years is in these words: Survive! Survive! And Survive!

Can Do vs. Will Do

Everything that agency manager told me was true. All those exciting opportunities are available to every single person signing an agent contract. It is the hope of every insurance agency manager that his agents will experience those sunsets on distant beaches and sunrises in different exotic places. Each test given, each seminar attended, each sales track learned, each personal one on one interview, and countless hours of gaining product knowledge are methods he will use to measure your “can do” because they don’t want to hire and train just to have someone drop out because they couldn’t find their way to do the business successfully. However, the day will come when you will open your office for business and your “can do” measurement controlled by the manager will be over and your “will do” stage will begin. 

If agency managers were completely honest and hadn’t just sold themselves on the potential agent’s ability, the sobering statistic of 1 in 10 becoming successful would dramatically change. Unfortunately, being salesmen with a salesman’s mentality and the constant pressure to hire new agents, some overlook red flags which appear in the recruiting process; and the hiring should never have occurred. Through no fault of their own, some agents were set up to fail right out of the shoot. It is not that they were failures or unsuccessful people–it’s just that they were not ever intended to be salesmen. They will find themselves on the sandy beaches of the world and Disneyland as successful accountants, computer whizzes, or diesel mechanics. 

Another sad commentary has to do with how an agent who experiences the discouraging environment goes about meeting it. Too many end up going to lunch with others who are failing in the business where they sit around wallowing in their afternoon beer or coffee sharing their sad stories of rejection, many even getting to the point of claiming the person who hired them wasn’t honest or in some way tricked them into making this tragic mistake. For some reason it never enters their minds that while they are failing, others are doing well, having the same market to sell to and the same time frame in which to succeed. It is perhaps a topic for another article, but why wouldn’t the person who was failing not go to the person who was finding success and discover what he or she was doing which allows them to experience the successful side of the selling spectrum? Personal experience taught me that those who were succeeding found it satisfying to share their success stories and the methodologies used on their way up the ladder. They even found satisfaction in being a mentor to an agent who had the desire to succeed. 

Living vs. Dying

This website has another article entitled “Desire to Live” which chronicles man’s progress through time and his desire to live. Nothing seems to motivate an individual to action more than activities which prolong life.  Most people feel there is a third alternative for them in this life: they are not going to grow old or die. They experience the illusionment of invulnerability. 

The article explains that we readily accept the concept of dying and readily admit it, but only as it relates to another person. This phenomenon spills over into actual actions which are related to growing older and dying. As reported in https://www.msn.com/en-us/money/retirement/americans-retirement-crisis-by-the-numbers/ar-AAEmvyA?ocid= Northwestern Mutual Planning and Progress Survey 22% of American have less than $5,000 saved for retirement; 15% have no retirement at all; 56% don’t know how much money they need to retire comfortably; and 41% are taking no steps to prevent themselves from running out of retirement savings though many see this as a possibility. It is also reported that 1 in 4 Americans don’t plan to retire, and this statistic is perhaps just the result of these people recognizing the reality and choosing to do nothing about it. They do this because they feel it is too late or they just don’t want to discipline themselves and put it off for tomorrow. 

Thorstein Veblen, Norwegian-American economist and sociologist in his book “The Theory of the Leisure Class 1899” writes… “conspicuous consumption, the spending of money on and acquiring of luxury goods and services to publicly display economic power of the income or of the accumulated wealth of the buyer, is a means of either attaining or maintaining a given social status.” In other words, it is not the saving of assets or the preparation for future needs which drives a person to act in this social world, but it is the obvious present spending which motivates financial decisions. A simple Chevrolet Traverse should be fine but having a Porsche 718 Cayman sitting in the driveway meets my ego needs much nicer. After all, the neighbor will never know I am just one paycheck away from financial disaster.

   Coupling this illusionment of invulnerability with the concept of conspicuous consumption makes it very difficult for the life insurance agent to get the client to take action on something which makes him/her face mortality. I don’t want to face the fact that some day I will no longer be able to work physically or become obsolete due to technological changes affecting my work environment. 

As you can imagine, with these psychological hurdles to contend with, when an insurance agent sets down to discuss the death benefits of a life insurance policy, it takes an incredible amount of energy to get a person to realize it could possibly be them. 

In some degree or another, three concepts seem to be able to help a person deal with the desire to live syndrome. These are love, fear, and greed. If an agent can determine which of these drives the client to action, sales can be made. (I will detail these three concepts in another article.)

Generalization vs Specialization

It is a growing trend for life insurance companies to either align themselves with established property and casualty companies or begin one of their own. They have discovered that the more products you can place in a household the greater is the recidivism of those products. It also allows for a greater number of personal one on one encounters where trust and confidence can be built, improving the opportunity for the agent to survive in the business. Those encounters allow the agent to become “their insurance” agent in the same vein as people refer to their doctor or their lawyer. 

This business model doesn’t appear to make an agent any better at selling life insurance, but it does appear to increase the longevity of the agent’s insurance career. It also appears the insurance agent finds the selling of property and casualty insurance to be much more like order taking rather than creative selling. This has the tendency to cause the agent to gravitate toward the property and casualty side of his/her business to the detriment of life insurance sales.

 For the life insurance salesmen who is a purist, property and casualty sales just get in the way of their true endeavor. It is something they cannot avoid due to many of their contracts requiring a certain level of production be maintained in all sales markets in order to reach higher levels of commissions. Consequently, many life insurance agents hire personal assistants whom they get licensed to handle that portion of their business. This is a two edged sword in that it relieves them of the day to day operations but exposes them to higher business expenses and employer/employee relationships. This may give the life insurance agent production bragging rights, but it may put so much stress on all involved it may not be worth the strain. 

Most successful life insurance agents end up specializing in one or two specialty markets where premiums charged are much higher per sale, making the agent’s time more profitable. Markets like estate planning, rolling over 401K proceeds to personal accounts, funding of buy-sell agreements, funding of business transitions, or annuities sales are not normally low hanging fruit for a new agent to pluck. Breaking into those markets takes some time which the agent may not have enough of. My forty plus years of selling life insurance and property and casualty insurance experience bears out the fact that agents who came into the business thinking they were going to make their mark by getting into those markets ended up out of the business. Most people who needed assistance in those areas were looking for someone who had more experience and knowledge because they could not afford a greenhorn mistake. They did not want to be the one the new agent would gain his/her experience from. In fact, many would talk to the new agent about their need and then when the time was right for them to purchase they would move on to a more experienced agent. Pretty disheartening but a brutal reality.

 With the exploring of these explanations, it should be pretty clear why not many who are exposed to the vision of a carefree lifestyle ever see the vision come true for them. Hard to sell life insurance? Yes and hats off to the ones who get it done!