Seeking Solutions For The Recruiting Crisis
With agent retention levels at all-time lows, its becoming harder for parties on both sides of the recruiting equation to see an upside.
Say, for instance, someone approached you with an investment opportunity that could provide you with long-term stability and the potential for unlimited income. Would you be interested? Now the catchtheres an 86% chance you wont make it.
Thats the gamble agents new to the business are facing today. Current industry statistics show that four-year retention levels for new agents are hovering around 14%.
Looked at from the other side–from a life insurance companys point of view–the expense to recruit, train and support a new agent is extremely high. Why, many companies have been asking, should they continue to invest so much in recruiting new agents when the expected return is so low?
Consequently, some carriers have abandoned their new agent recruiting efforts and focused instead on the experienced agent. But with the average age for the insurance producer estimated at 54, the question of who will recruit the next generation of producers becomes a pressing issue.
The number of new agents recruited into the life insurance business hit its peak in 1975, with over 50,000 new agents signing on. That figure has steadily declined–leveling out in the last few years. Most recently, 2002 saw 32,000 new agents licensed, a 4% decrease from the previous year, according to officials at LIMRA International. With fewer agents coming on board, retention levels around 14%, and an aging field force, the industry is headed for a shortage in agents.
“The industry is facing a crisis,” states New York Life Senior Vice President, Eric Campbell. “Were not recruiting as fast as people are dying, becoming disabled and retiring.”
One reason the industry finds itself in this predicament is because over the years many general agents and agency managers took their eye off their primary task: bringing new producers into the business, says Maury Stewart, a former general agent, now an executive consultant to Penn Mutual, Philadelphia, Pa.
“General agents in some cases got lazy and didnt conceive the fact that they had to keep putting new people on,” he adds.
These managers stopped recruiting and started to focus more on the business aspects of managing their agencies. As a result, they delegated the recruiting of new agents out to newer, lower level managers who didnt have the training and support to do their jobs, says Eileen McDonnell, senior vice president of individual insurance business development at MetLife, New York.
Partially to blame, continues Stewart, are the career companies. “Companies went away from having really good management development programs where they trained people effectively to recruit and help new people succeed,” he says. “You had a lot of people out there that were trying to do it, but they didnt know how to do it.”
Furthermore, many carriers cut back on their new agent financing programs. “It placed all the general agents in the position that unless they could finance [new agents] themselves, they just cut back,” he says.
As a general agent Stewart did just that–he financed new agents himself. He feels that by doing this today, general agents would be more selective in their recruits, and would be more committed to providing them with the training and support they need to succeed.
“I think people need to get back to understanding that one of the most important things they have to do is to add new people every year and have a net increase in their agent population every year,” says Stewart.
McDonnell agrees, and notes that in order for an agency to be successful recruiting new agents, it is extremely important for the agency manager, or general agent, to be actively involved in the process. “The first line management needs to be engaged,” she says.
According to McDonnell, the successful agencies today have managers who have continued to maintain an active role in the recruiting process. “They never separated themselves from the responsibility,” she says.
Campbell agrees with this involvement at the local level. He feels the key to getting quality recruits and keeping them is having a strong focus on developing them in the agency with a strong management team. “Thats a real key area for retention and productivity,” he says.
But shifting the focus back to recruiting at the agency level is not enough on its own, says McDonnell. Carriers need to make a decision at the executive level that they are committed to building and maintaining a career agency field force. “That has to come from the top,” she says.
“Companies need to make a decision as to what their distribution system is going to be and be willing to invest in it,” adds Stewart.
Those carriers that did not commit to an agency building distribution strategy are now targeting experienced producers as a means of building their field force, Campbell explains. “Unfortunately, that has a cannibalistic effect on the industrysomeones got to be bringing in new people,” he says.
Further contributing to the decline in new recruits, McDonnell continues, is the industrys failure to position how the career of an insurance professional has “evolved over time.” Traditionally, she says, the insurance career was more product-focused, but today its more planning-focused.
To help increase the number of people interested in entering this business, McDonnell feels that the industry as a whole should do a better job positioning the career in the eyes of the public.
According to McDonnell, the job-rating almanac has consistently indicated that financial planning is one of the top three career opportunities for job seekers. “The industry hasnt done a good job associating the fact that a financial planning career is one that you can get in the insurance industry,” she says.
McDonnell feels that the career should be positioned to the public as one where you have the opportunity to be flexible in the time you work and your geographic location. The industry also needs to promote the opportunity for high compensation, and the ability to work as an entrepreneur “within the confines of a strong financial institution,” she says.
Once new people are drawn to explore a career of financial planning with an insurance carrier, its the agency managers job to be selective in who gets the opportunity. “When you recruit somebody, you really are trying your best to keep the wrong people out of the business,” Campbell says. This requirement is more important today than ever before, he says, due to the shrinking profit margins on new products in the marketplace.
Campbell explains, “20, 30, 40 years ago, you had larger profit margins so you could perhaps not be as selective as possible. Therefore, you could afford not to retain as many and still be profitable,” he says.
Today, carriers cannot afford to have such high turnover and need to take that into consideration when hiring new career agents, he says.
According to Stewart, agency managers just need to see more candidates. As a successful general agent himself, Stewart had to interview at least 500 candidates over the course of a year to hire 15 to 18 good recruits. “It sounds too simple, but I think thats what it comes down to,” he says.
Since more than 75% of last years 32,000 newly recruited agents are inexperienced, according to a recent LIMRA report, the next task at hand is making sure these agents get the training and support they need to become more than just another statistic. Carriers who are committed to agent development must be sure to have the staff on board to meet these needs. Otherwise, “you reach a point of diminishing returns. If your manager has hired too many people then they dont have enough time to develop them–so it hurts your retention,” Campbell says.
At New York Life, Campbell explains, there are 180 developmental managers throughout the career distribution channel whose primary responsibility is to train and develop career agents. “They teach classes. They do one-on-one supervision and training. They go out in the field and work with agents; they perform anything that has to do with training and development of agents,” he says.
McDonnell feels that a significant contributing factor to a new agents success is participation in a mentoring program, which she encourages all new producers to do.
Continuing to support an agent beyond the initial training period is also an important factor in improving agent retention. Companies that are committed to keeping their producers must be able to support them as they grow into new markets, she says. “As people become more sophisticated, dealing with more affluent clients, there are high-end needs that also need to be supported with training, development programs and marketing,” she says.
Reproduced from National Underwriter Edition, March 17, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.