After hitting a 10-year high 3 years ago, total agent recruiting has fallen for the past 2 years, once again raising a perennial industry question: Where will tomorrows agents come from?

The recent decline in recruiting–down 3% in 2003 with almost 30,000 recruits–can be attributed to a number of factors, which we will discuss later in this article. Although recruiting is down, about half the companies in LIMRAs recruiting survey increased their number of recruits in 2003.

One of the industrys concerns is that the top 10 recruiting companies account for at least 70% of the total. Can this limited number of companies continue to supply the industry with the majority of new inexperienced recruits? Would we see a ripple effect if a couple of these companies greatly reduced their recruiting? What would happen if a couple of these companies stopped their recruiting? Unfortunately, there are no clear answers.

Historically, agent recruiting began to increase gradually in the mid-to-late 1960s, according to LIMRAs “U.S. Agency-Building Recruiting Trends” survey. This annual survey includes full-time inexperienced and experienced recruits. Inexperienced recruits account for approximately 70% to 80% of each years total. Recruiting peaked in 1975, when more than 50,000 agents were recruited. In 1976, a long recruiting decline began and continued during the 1980s.

The mid-1990s were the slowest years for recruiting, reaching a 30-year low. After the long recruiting decline in the 1990s, recruiting gradually began to increase starting in 1997 and continuing through 2001–when recruiting peaked at almost 36,000. Over the past 2 years, the total number of recruits declined again.

Currently, some companies are trying to focus on hiring quality recruits, not quantity. Developing and retaining the better agents is a strategy for these companies. More than a third of the companies in “LIMRAs 2002 Agent Production and Survival” study have 4-year agent retention rates ranging between 20% and 52%, well above the industrys 2002 average. Almost a third of the companies had rates below the industrys average of 11%, the lowest in 30 years. Companies with poor agent retention need to recruit more agents just to maintain the current size of their sales force.

Improving agent retention has become a priority for most companies. Even with good recruiting and selection tools, the majority of recruits terminate within 2 years of being hired. The company expenses to hire, train and finance these new agents are never recovered, thereby increasing the overall costs for the career distribution channel. In some instances, agents leave a career company to work for themselves as an independent producer, or to work for another, competing career company. In 2003, 21% of all recruits had prior insurance sales experience.

The present agent population is getting older with an average age of about 55. A number of these agents soon will be considering retirement, or at least slowing down to almost a “part-time” work schedule. This has implications for the industrys overall sales force. Based on LIMRAs “Census of U.S. Sales Personnel,” the size of the career sales force is declining. At year-end 2001, there were almost 179,000 full-time career agents, down 8% from 1998, and down 25% from 10 years ago.

Company downsizing, acquisitions and mergers, and agency consolidations by life insurers contribute to the recruiting decline. Some companies are disbanding their career distribution channel, adding nontraditional “agent” channels such as broker-dealers and banks. A number of companies are adding independent producer distribution channels to supplement their career sales force, as they try to access new markets.

In addition, according to LIMRAs “Census” survey, the number of career agency heads declined 42% from 1993 to 2001. This reduction contributes to the overall recruiting and sales force decline as there are fewer sales offices looking for recruits. The decline in the number of agency heads partially is attributed to companies efforts to merge agencies, as they try to improve agency profitability and gain economies of scale. As the number of agents and agency heads declined, the number of agents per agency head has increased, resulting in a greater span of control for the agency head. This has caused some companies to emphasize the development of second-line supervisors.

Does the industry need to recruit as many agents as it did in the past? Have technology advances helped todays agent become more productive? With companies providing agents with more services and support such as sales illustrations, call centers and straight-through processing, agent productivity has improved, as some of the agent service responsibilities have been reduced, allowing more time for selling.

Even though agent retention and recruiting is down, agent productivity has improved based on the average number of policies sold and the average first-year commissions (FYCs) per agent with 5 or more years of service (see Table). Between 1998 and 2002, FYCs have increased by about 11% annually, according to LIMRAs “Agent Production and Survival” study. About 70% of the average number of policies sold were life policies.

Although the deterioration of agent retention puts pressure on agencies and companies to increase recruiting, gains in agent productivity reduce the need to add more agents. However, the question remains, can this strategy deliver the sales growth companies need to satisfy their many constituencies?

Thomas F. Spinelli is a manager in LIMRA’s Distribution Research Center. His e-mail is

Margaret S. Honan is an analyst in LIMRA’s Distribution Research Center. Her e-mail is

Reproduced from National Underwriter Life & Health/Financial Services Edition, March 19, 2004. Copyright 2004 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.