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Life Health > Life Insurance

Doomsday Can Wait

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Reading the comments of Maurice Greenberg to the LIMRA annual meeting as reported in the Oct. 25 issue of National Underwriter caused me to have a “flashback.” In his remarks, Greenberg rejected the notion that the life insurance industry is mature. A mature industry has special meaning to market researchers and my flashback related to a presentation made by an independent marketing researcher at an industry meeting almost 30 years ago.

In that presentation, the researcher, using graphs and illustrations, charted the growth of a typical industry and how, over time, demand for the product levels off and grows only in proportion to population growth, or may even decline. This was deemed a mature industry and we were placed in that category. To say the least, it was a pretty gloomy presentation and I for one did not buy it then, and like Greenberg, dont buy it now.

Regarding that presentation, several things seem worth noting. First, that particular researcher has not been heard from in years. Second, the highest honor club in my company required $35,000 in first-year commissions in the year of the presentation, whereas today the qualification requires more than $200,000. Third, some of the companies that bought into the concept and changed their approach to the market are no longer a factor in our marketplace.

But these were confusing times and complicating the picture further was a prediction by Jim Anderson, managing partner of a prestigious actuarial firm. Anderson predicted that by 1990 there would be only 25,000 agents left in the field and their role would be not so much sales-oriented, but rather consultative on a wide range of financial services. This prediction reverberated throughout the industry in speeches and articles in the media. At the time it reminded me of the Chinese proverb: “One dog barks, and a hundred bark at the noise.”

I have been listening to and reading about predictions regarding our business for almost 50 years and for the most part, they have been wrong. Inasmuch as many of them, if not most, have been gloomy, I suppose we should be thankful that they did not materialize. But it does prompt the questionwhy? I believe there are several plausible explanations.

Business predictions are even trickier than predictions about the weather. Whatever the weather coming our way may beyou cant change it. If it is going to rain or snow you cannot stop ityou only can prepare for it. However, business can change tactics or adopt new strategies and completely alter the future course of events, thereby defeating the predicted outcome. Business predictions are never certain. It is interesting, though, that predictions usually get lots of press and hypebut you seldom see a press release when one flops.

Additionally, our business is, I believe, an enigma to many people doing market research. Too often, I think, they view the life insurance product like commodities they track. And therein lies the error of their ways, for they do not understand our sales process, which is different in many respects. It is true that product marketing does change over time and salespeople often work themselves out of a job as industries mature.

My grandfather pioneered the sale of Electrolux vacuum cleaners in South Carolina in the early 1930s. To sell a machine, he had to go into a home and demonstrate its effectiveness. Only one company I know still does that; most vacuum cleaners today are sold in stores where people walk in and buy them. At about the same period, refrigerator salesmen were following ice wagons around town looking for prospects. Both the ice wagon and that kind of salesperson have long disappeared. When my aunt Ruth bought her first car, the salesman had to teach her how to drive. As a child, I accompanied her on her first lesson and still can remember how frightened I was each time the car lurched as the salesman was patiently trying to teach her to let the clutch out slowly. Car salesmen dont do that anymore. But life insurance salespeople are doing essentially the same thing they were doing 70 years ago, albeit in a more sophisticated manner. Why?

What I believe some researchers are missing is that the demand for life insurance is derived from conditions created by the agents (by whatever name they are called). Agents sell plans, many of which emanate from their own creativity. Uses for life insurance in years past were relatively simple. Today many are complex. Over the years, agents have conceived of uses for the product not envisioned or predicted in former times. Split dollar, deferred compensation and buy-sell arrangements are among many creations that have helped our business adapt and continue to grow. The life insurance policy itself is the funding mechanism for the plans that continue to be created primarily in the field. Our business is not likely to become “mature” as long as our salespeople continue to be creative.

Whenever I hear gloomy predictions, I am reminded of this quote on the wall of one of the hearing rooms in the Capitol building in Washington: “Due to a shortage of experienced trumpeters, doomsday will be postponed three weeks.”

Reproduced from National Underwriter Edition, November 18, 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.


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