Given that life insurance sales suffered a more dramatic decline in the first half of 2009 than at any time since World War II, one might expect that all advisors are hurting. While that may be true of most producers, some actually have grown their practices during the recession.
“I’m having a very good year selling life insurance,” says Chris O’Shea, an advisor representative at Allegiance Financial Advisors, Jacksonville, Fla. “In terms of premium dollars, my sales are up from 12% to 15% since last year.”
E.L. “Duke” Marston, a principal of Marston Financial & Insurance Services, Belfast, Me., has enjoyed a similar rise in sales. “I’m finding that individuals are still interested in life insurance, both permanent and term policies,” he says. “In light of all that has happened in the economy and in the credit markets over the past year, they understand the value of a product that offers a guaranteed benefit.”
These comments contrast starkly with the conclusions of a recent study on life insurance sales from LIMRA International. The Windsor, Conn.-based firm reported that individual life insurance annualized premiums plummeted 26% in the first quarter of 2009, then dropped another 20% in the second quarter, yielding a combined 6-month decline not witnessed since 1942.
Variable life sales, which fluctuate with the market, suffered the most, falling by 50% in the second quarter and 55% for the first half of the year. Universal life sales fell 29% and 27%, respective, over the same periods.
Ashley Durham, a senior analyst of product research at LIMRA, attributed the dip in sales in part to tighter budgets faced by individuals in the current recession. Another factor is the rise in premium costs, increases made necessary in many cases due to stiffer capital reserve requirements.
Yet, advisors have continued to build their practices despite the difficult environment for life insurance sales. What gives? Those interviewed by National Underwriter credit their own efforts, some of which were undertaken to counteract the effects of the contracting market.
Marston attributes more than half of his revenue gain to a decision he made in 2008 to purchase leads from a third-party vendor. He pays $15 per contact–a manageable commitment, he says, in comparison to lead-sharing programs that often charge fees of $1,000 or more for leads sold in bulk. Of the 3 to 6 leads he receives monthly, he typically closes one or two, he says.
Philip Harriman, the immediate past president of the Million Dollar Round Table and a principal of Lebel & Harriman, Falmouth, Me., observes that his practice has compensated for lost life sales in the past year by adding a credentialed human resources staffer. The rep handles HR functions–complying with government regulations, developing employee policy manuals, conducting pay scale analyses, etc.–for small business clients that don’t have an internal HR staff person.
“The HR rep has given a dimension to our practice we didn’t have before, and one that provides a competitive advantage,” says Harriman. “And because the rep is providing a fee-based consulting service, additional revenue is generated for the firm.”
Harriman adds the practice has resisted the temptation to lay off paraprofessionals and administrative employees during the recession. While maintaining payroll at full strength has been painful financially, staffers who might otherwise have been downsized are needed more than ever because of a heightened concern among clients about their ability to meet financial objectives.
O’Shea, an 11-year industry veteran who caters to boomers and retirees, says his revenues rose, too, after he hired an assistant to manage pre-sales prospecting, marketing and administrative tasks.
“Adding a qualified assistant has yielded a remarkable improvement in terms of the efficiency with which I pre-screen clients and prospects,” says O’Shea. “I’m now able spend a lot more quality time with clients.”
Many of his new clients, O’Shea adds, have compensated for one negative consequence of the recession: a significant drop-off in fee-based income tied to assets under management. When equity values plunged by 40% or more during the credit crisis, the investments O’Shea oversees–stocks, mutual and exchange-traded funds, among other investment vehicles–suffered a similar tumbling. He thus has had to corral new assets to keep AUM-based fee income on an even keel.
Wholesalers also have beefing up their workforces. Larry Long, president of Lawrence B. Long Insurance Services, a Sacramento, Calif.-based broker-dealer, has hired marketing people to attract producers. The recruitment drive has yielded increased life sales, in part because many of the new hires are seasoned producers who market to demographic groups–older boomers and seniors–that have substantially greater estate and wealth preservation planning needs than do younger clients.
“The older clients also have more discretionary money to pay premiums,” he says. “And as they’re older, they generally see the need for life insurance more clearly than do younger prospects.”
“The advent of UL products offering a guaranteed death benefit has really helped our business,” he adds. “We can satisfy client who may need insurance for more than 30 years. And at older ages, we’ve found that guaranteed UL is even price-competitive against term policies.”