David Woods, CEO of the National Association of Insurance and Financial Advisors as well as head of the Life and Health Insurance Foundation for Education, spoke about the issues that the task force is addressing in an interview here with National Underwriter.
Woods said the 2 main threats to the industry are the lower number of new recruits in the agency force, along with low retention, and the reduction in the number of people who own life insurance.
There are millions of Americans, he said, who dont own life insurance and thus who dont talk to Congress about concerns involving life insurance.
There is a need to preserve the tax benefits of life insurance, Woods said, but if Congress comes to believe the tax benefits are only for the rich, the tax benefits may not be preserved.
Woods noted that a recent survey showed that 50 million people under age 65 said they need more life insurance. However, he added, fewer than 10 million policies were sold last year, a shortfall of 40 million, which he called an “appalling statistic.”
Woods said he is convinced the vast majority of the 40 million are in the middle market and that the market is not being served. Woods said his gut feeling is that of those 40 million people, 35 million didnt buy it because no one asked them.
But Woods believes middle income clients would be willing to pay in order to work with a professional advisor. He also believes the middle market is not as price sensitive as some say.
Woods also addressed the situation that agents face in the middle market.
He said when he first started selling insurance in 1966, a 35-year-old male would pay $22 for every $1,000 of whole life insurance. Today, Woods said, a 35-year-old male pays $8 per $1,000. Thus, he said, commissions for the agent are way down.
At the same time, Woods said, term insurance has become commoditized. A 35-year-old male pays 90 cents per $1,000 of coverage for a 20-year level premium term policy, he said.
Commissions and margins, he said, have disappeared.
Under these circumstances, he said, an agent would have to see 10 people to make 3 closing presentations to sell 1 policy, and if the policy was a 20-year term, the agent would earn $300 to $400 for perhaps 30 hours work.
“Thats the reality,” Woods said. “Its not anyones fault. The marketplace is highly competitive.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, March 25, 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.