In reading the reports coming out of the recently concluded annual meeting of the American Council of Life Insurers, three issues caught my eye. The issues were: 1) the low level of agent recruitment, 2) the lack of proper attention to and serving of the middle income market, and 3) the continued low savings rate in the United States. Despite the number of references to those problems, I do not recall reading about any proposed solutions to any of them.

I believe these are all major issues that our business can and should address on a high-priority basis. Moreover, I also believe the three issues are interrelated and can be solved by a unified approach. Such an approach directed initially at better serving the middle market also may bring about a solution to the other two problems.

Traditionally, the middle market was the starting ground for new agents in our business. Problems to be solved were relatively simple and it was easy to fit our most basic core products into their financial capabilities. Today, it seems to me the emphasis is to move new people into the most esoteric areas of our business as quickly as possible. Im told by seasoned managers that their role as compliance managers for the most sophisticated products has reduced their time for sales training to virtually nil.

The problem is further exacerbated by the requirement of a host of licenses not formerly required by agents working in the middle market. I am also told that new people with potential for future growth are being lost in their introductory phases by being expected to move too quickly into a broad product environment requiring difficult licensing and compliance regulations.

Perhaps the industry should ask itself if this is realistic. Perhaps the former system, allowing agents to grow and graduate into more sophisticated markets at their own pace, and to move up the economic ladder with their own clientele, still has merit. Since retiring, I have served on a number of cases as an expert witness in a variety of lawsuits. In almost every case, problems that created the lawsuit were the result of a poorly trained agent working in an area way above his or her head.

The middle market is very important if for no other reason than it is the largest. Additionally, these are the people who need us most and often lead lives in hock with consumer debt. They pay the high interest rates levied on credit cards and often are trapped in dead-end jobs because they cannot afford to take a chance on a new opportunity.

Savings and the ability to save too often have the wrong focus. Competition centered around rates of return and the growth potential of savings sometimes obscures the most important element in a savings program. I will use my own experience to illustrate the point.

Almost 50 years ago, I was employed by the Arizona distributor for a large national company. I was being groomed eventually to buy and take over the company. One day I awoke to find the boss son-in-law employed by the company and overnight it seemed that my job now might be a dead end. It was at that point I became attracted to the insurance business. However, the offer of a $220 per month guarantee for what I later learned was for only 90 days was not much of an inducement to give up a good job and make a change. But Gladys and I knew we had to make a change and so we inventoried our savings to see if we could sustain a period of low earnings. By far, the largest nest egg we owned was the cash value of our life insurance and we determined that his was adequate for us to take the plunge. As it turned out, we did not have to use our cash values, but they were always there just in case. What was the rate of return on those policies? I have no idea. But the fact that they were there when we needed them earned us a fortune in the ensuring years.

Later I purchased a policy to assure our sons college education. As it turned out, we didnt need itbut it was always there if worse came to worse. Today that policy has a cash value sufficient to fund long term care if we ever need it. What was the rate of return on that policy? I have no ideabut it fulfilled my every expectation and more.

When I moved to Washington as CEO of the National Association of Life Underwriters, we had to buy a home and a house full of furniture for we retained our home in Phoenix. This was at a time when interest rates spiked to 22%. Again, our cash values came to the rescue, enabling us to make a move that greatly enriched our lives.

When I retired, I converted more than a million dollars in policy cash values to fixed annuities. What kind of return am I getting? I have no precise idea. All I know is that each and every month my checking account is refilled and I can spend freely knowing that it will again be replenished month after month after month.

In a nutshell our policy cash values have enabled us to be our own banker at very critical times in our lives. They have given us economic freedom, thereby allowing us to make choices that otherwise might have been impossible. We have invested in other things over the yearssome good, some not so goodbut our base plan has provided the stability and assurance needed to seize opportunities that arose.

This is a theme that was once the mantra of our business and I am ever so glad I bought into it.

The middle market offers both a challenge and an opportunity for our business. Perhaps recruiting to that market instead of the over-crowded top of the economic pyramid just might provide a solution to all three of the problems cited at the ACLI meeting and bring economic freedom to millions of people.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 14, 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.