Peter Schneider General Counsel and Chief Administration Officer Primerica Co-Chair ACLI Producer Licensing Task Force

Transcription

1 Peter Schneider General Counsel and Chief Administration Officer Primerica Co-Chair ACLI Producer Licensing Task Force 1

2 Producer Licensing It is Time to Innovate ACLI Annual Conference New Orleans 10/29/2013 2

3 3 Video

4 The Middle Market Located Somewhere Between More difficult now than in the past for many people to achieve a Middle Market status because prices for certain key goods health care, college and housing have gone up faster than income. Parents working more hours to attain and sustain Middle Market standard Middle Market families aspire to home ownership, a car, college education for their children, health and retirement security and occasional family vacations Incomes rose significantly for families during the 1990s but few gains occurred during the decade of the 2000s. U.S. Department of Commerce Middle Class Task Force

5 The Middle Market s Insurance Needs Most carry no life insurance outside of work Only 44% of households have individual insurance [LIMRA 2010] 30% of U.S. households have no insurance at all [LIMRA 2010] Most have little to no retirement savings 60% of workers survey by EBRI in 2012 had less than $25,000 in savings and investment Critically underserved 8 in 10 households do not have a personal life agent and most never did [LIMRA 2010] 6 in 10 do not remember being approached to buy life insurance in the last 2 years [LIMRA 2012] Most desire protection - 50% of underinsured middle-market households say they are considering more insurance Most prefer to buy from a live agent 67% of households surveyed by LIMRA preferred to buy life policies in person. [LIMRA 2010] 5

6 Middle Market Does Not Purchase Insurance over the Internet No One Really Does Distribution Methods Work 55% 4% Completed and submitted online Direct 25% Face to Face 55% Internet 10% 1% 2% Completed online then printed and mailed Started online, completed by phone 1% Started online, completed in person Work = At your place of work (where your Household pays all of some of the premium) 2% Don t remember Source: LIMRA Buyer Nonbuyer Study LIMRA 2011

7 To Reach the Middle Market you Must Have Boots on the Ground Even in the Internet Age, Agents are Still Key Distribution Model Households who looked only online were 36 percent less likely to buy compared to 74% of shoppers meeting with reps face-to-face [LIMRA 2012] 35% have not purchased life because no one has approached them [LIMRA2013] In 2004 the Industry s Task Force for the Future Proposed More Agents are Needed and We Have Yet to Act TFFF SOLUTION: Build dedicated middle market sales unit TFFF SOLUTION: Recruit soccer moms with part-time contracts TFFF SOLUTION: Make an investment in recruiting and training

8 Face to Face Distribution is Still Shrinking 8

9 Dwindling Sales Force 300,000 Sales Force Has Shrunk by One-Third Since the 1970s Affiliated Agents in the United States 250, , ,345 30% 174, , ,000 50, LIMRA MarketTrends

10 Dwindling Sales Force Independent Agents Down 9% Alone Between 2007 and , , Limra Census

11 Aging Sales Force Over 50% of Sales Force is Aged 45 or Higher Average Agent Age = 56; Average US Worker = 37 21% 6% 4% 18% We need to grow these populations 29% 22% Age 65 and Older Under Age 25 Age25-34 Age Age Age Facing Up to an Aging Producer Workforce; LifeHealthPro; 7/2012

12 Retaining Those Who Get Licensed Also a Problem 85 Percent of Recruits Don t Last More Than Four Years at a Company Mean Four Year Retention Rate only 15% - We aren t gaining any ground 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 12 87% 86% 85% 84% 85% LIMRA: MarketTrends 2010

13 Not Surprising! Fewer Agents = Fewer Policies 20,000 18,000 16,000 14,000 12,000 10,000 Life Policies (000) 8,000 6,000 Career Agents 4,000 2, LIMRA 2012: Drivers of Sales 13

14 Life Protection At A 50 Year Low 90% 80% 70% 60% 50% 40% 30% Total Individual Group 20% 10% 0% LIMRA: 2010 Household Trends

15 The Industry Has a Contract and Some in Washington D.C. are Reviewing it But as it happens, insurers may have good reason to assume their preferences could play a role in tax reform and budget discussions where many provisions in the code have fierce outside defenders. Some economic analysts on both the right and the left, for instance, have pointed out that a tax preference for investments on life insurance payments the so called inside buildup incentive does primarily benefit the wealthy. Published in The Hill - 04/17/13 15

16 Others are Taking Notice Also.rather than continue to wait for the direct writers to develop this market [middle market], perhaps the reinsurers should do it. everyone focusing on big sales high distribution costs higher underwriting and mortality costs Reinsurance News - 11/

17 Industry Has Shifted To Affluent Households High End Policies as a Percent of All New Whole/Universal Life Policies Sold 45% 40% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1% 10% Net worth $126,000 or below for bottom half $2,000,000 or more Wall Street Journal, October

18 Industry Has Shifted To Affluent Households cont. 18 ACLI FACT Book 2012

19 Industry Has Shifted To Affluent Households cont. ACLI FACT BOOK Face amount indexed for inflation

20 How Did We Get Here? Some Things Haven t Changed A One-Size-Fits All Producer License Pre-licensing Testing (mostly administered by for-profit companies) 20

21 How Did We Get Here? Middle Income Finances Economic Forces Cost to create and retain a producer Mobility Career agent is an Oxymoron 4 year retention at rate is still abysmal Competition from other sources Securities Real Estate Technology Education 21

22 How Did We Get Here? Demographic Changes 100% 80% 60% 40% 20% 0% 1960 Population Mix 85% 3.50% 11% Caucasian Hispanic African American 0.60% Asian Yesterdays Prospects 22

23 How Did We Get Here? Demographics have changed 90% Demographics 1960 vs % 70% 60% 50% 40% 30% 20% 10% 0% Caucasian Hispanic African American Asian

24 How Did We Get Here? Is This Still our Agent? 24

25 Demographics America is Changing % Change from 2000 African State 2010 Population Whites American Hispanics Asians Multiracial Other California 37,349,363-5% -1% 28% 31% 7% 22% Texas 25,257,114 4% 22% 42% 71% 39% 69% New York 19,392,283-4% -1% 19% 36% -11% 8% Florida 18,843,326 4% 26% 57% 70% 23% 62% Illinois 12,843,166-3% -1% 32% 38% 19% 14% Pennsylvania 12,709,630-2% 10% 83% 59% 58% 22% Ohio 11,536,182-2% 8% 63% 45% 48% 17% Michigan 9,877,574-3% -1% 35% 35% 16% -12% Georgia 9,712,587 6% 25% 96% 82% 74% 67% North Carolina 9,561,558 10% 17% 111% 84% 95% 67% 25

26 In Today s Environment, This is Who We Need to Attract 26

27 Professionalism Has it Helped or Hurt? Professionalism movement created disparity between opportunity and benefit Cost to train, produce and retain a successful rep is high Three years after contacting 100 new agents, a company with average agent retention and productivity retains 20 of those recruits and has invested about $103,000 in each of them The break-even point occurs at 10 years. The compensation opportunity isn t attractive for the commitment required $46,770 Life Agent vs. $70,140 for Securities LIMRA: Investing in New Agents 2010 Bureau of Labor and statistics 27

28 Testing Can Be A Roadblock Those Most Likely to Work in Underserved Markets are the Least Likely to Make It Through the Licensing Process Life Licensing Exam Pass Rates by Demographic 100% 90% 80% 72% 89% 75% 80% 70% 60% 57% 66% 63% 59% 50% 40% 30% 20% 10% 44% African American Caucasian Hispanic Asian 0% COLORADO ILLINOIS FLORIDA LOUISIANA MARYLAND NEW YORK PENNSYLVANIA TEXAS VIRGINIA 28 State Reports

29 We Need to Innovate Today, most think of innovation as technologically related, however, many of the greatest innovations had nothing to do with technology Wheel Bow and Arrow Compound Interest Printing Press Voting rights Paper clip Sticky note 29

30 The Life Industry Is Innovative But Most Ideas Don t Focus on Licensing and Distribution Innovators Showcase Best Review 2012 ExamRight American General RiskRighter Crump Life Insurance Services ParallelPay Eastern Alliance Insurance Group RiskMark FM Global LifeAccess Accelerated Benefit Rider Hartford Life Insurance Co. 30

31 Can We Correct This? 31

32 because Our Industry Needs Innovation 32

33 Sometimes We Need To Go Back To The Future? the agent should make out a complete list of all his friends and acquaintances, and set about the work of seeing and addressing them personally..i must, I will, Solicit, Solicit, Solicit H.B. Hyde Founder, The Equitable: training manual

34 Industry s Voice Through The ACLI In 2005 the ACLI Producer Licensing Task Force was formed to identify and address barriers to entry and this group has been supported at all levels of the ACLI Partnered with NAIFA Worked with the NAIC on many key reform topics Uniformity in pre-licensing and testing Life vs. Life and Health Student demographic collection Producer Licensing Handbook Assisted with NAIC Producer Licensing Handbook Many victories but distribution growth to middle market still an issue 34

35 Our Potential Opportunity is Better than Ever Because it s Bigger than Ever Marketplace is void group insurance will not fill the gap Change doesn t mean there has to be industry losers Need mindset change cannot reach middle income market with upper income reps Strong preference for community based reps elitism is our enemy State regulations can be laboratories for change 35

36 What are the Ideas that will Open Doors? Diversity 36

37 Innovation Ain t Dead Graduated licensing system works in other industries Securities (38 different licenses), Medical, Contractors, Transportation, Legal, etc. Corporate Licensing Apprenticeship Testing fairness reforms Automated processes Economical improvements 37