BY THOMAS F. SPINELLI and MARGARET S. HONAN
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.