Critical Mass

Roger Crandall never thought he would have a career in the insurance industry, but for a recent college graduate in 1987, the job market following the Black Monday crash looked bleak. So Crandall, an aspiring businessman and son of a career MassMutual sales rep, turned his investing savvy to the world of life insurance for what he thought would be a year-long stint. It wasn’t long before he realized that he had everything he wanted for a career right in front of him, and so began his climb to the top of one of the world’s largest life insurance companies. National Underwriter spoke with Crandall recently to get his views on the state of the industry, what tomorrow’s best practices look like and what opportunities need to be seized today.

LIMRA recently published some depressing figures about life insurance ownership, which is at its lowest point in decades. What does that mean for someone like you?

I think life insurance is profound because when you think of how traumatic it is to have something happen to a loved one, the financial trauma is something you don’t need to deal with, it gets even worse when you have to make decisions. I just went through this in my wife’s family, where someone passed away. I was stunned to find out they basically had bare bones minimum life insurance. Now all of the sudden, you’ve got a woman in her 70s who’s having to make choices on things like whether she needs to sell the family home, all while dealing with the personal trauma that accompanies a death. To me, life insurance is such an integral part of how a financial plan should work, that’s why I was so disappointed to see the LIMRA data that just came out that states that we have the highest proportion of U.S. households without life insurance in decades.

When you are in your 20s, thankfully, unless you have a tragedy of a lost friend or something, very few people run into the circumstance where they need life insurance. But as you get into your 30s, 40s and 50s, increasingly you get the phone call of a friend who just got diagnosed with cancer and died, or something similar has happened. The first question everybody always asks is, “How is the family?” That is really code for, “Did they have enough life insurance to make sure their family is going to be taken care of?” Frankly, that’s something you don’t think about too much when you are in your 20s.

On the one hand, it makes a great opportunity for a company like ours that has made the decision to build its career agency systems. With 5,000 career agents, MassMutual has lots of financial professionals out there who can explain to people how life insurance can make a difference in their lives. That’s clearly contributed to the growth we’ve seen in our whole life sales in particular. But I have to say that as a whole, the industry has done a poor job of explaining to people how life insurance is a key component of their financial plan. We need to do a better job of that.

How did things get to where they are now? You would think somebody would have noticed before it got to this point.

It has been going on for a long time. By continuing to invest in its career agency system and growing its number of career agents, MassMutual has experienced very strong sales growth. But across the industry as a whole, the number of agents has been declining. Part of that is due to companies deciding to focus on third-party distributors who are focused on more financial assets other than life insurance.

How long will it take for life numbers to get back up over 50% or 60%?

All I know is if we can keep growing our own sales by double digits year over year, we’re going to help the rest of the industry get there. Just in 2Q, for example, our whole life sales were up 29% over the previous year, and the previous year we had record sales. If we look at 2005 to 2008, we actually grew at a 14% compound annual rate while the industry grew at a 1% rate. And in ’09, we had double digit sales on top of that 14% CAR as well. We’re living proof (and frankly, some of the other mutuals are, too) that continued investment in training and focusing on the product works.

Who is MassMutual selling to now, and what are your plans for developing additional markets?

Broadly speaking, we’re focused on the mass affluent markets, so folks that have $75,000 or more of household income would be our broader starting point. Small businesses are also important for us. One thing we discovered in our own research is that 40% of smaller, family-owned businesses are so focused on their day-to-day operations that they don’t have any documented succession plan at all. Typically, if you have a succession issue, life insurance can play a key role in keeping a small business in a family’s hands when one generation moves to the next. We’ve created a certified family business specialist designation and we have 350 of our agents who have become certified family business specialists, and we’ve given them extensive training in the unique issues that family businesses face. So small business is a big opportunity for us.

The other two places with massive opportunities are our multicultural markets and women’s markets. Just think about what’s happened with women in the United States over the last 30 years. They are now the majority of college graduates and small business startups. Some studies say they control 60% of U.S. wealth and are more likely to have gone to college and grad school than men. We think that market has been under-represented for life insurance sales, so we’re focusing on two things. One is recruiting more female agents; last year, some 25% of our new recruits were women. Also, we’re making sure that our offerings are consistent with what women markets might want.

We talked a little bit about the statistics around women; those also hold true of multicultural groups in terms of their representation in going to college and grad school and starting small business and accumulating wealth. Although most agency forces are still predominantly men in their 40s and early 50s, we are really working to turn that dial. We’ve been focusing on several key markets, such as the Hispanic market, the Korean-American market, the Chinese-American market and the African-American market. This is very much a roll-up-your-sleeves kind of effort. It’s not a massive national campaign. It’s in a city like Houston, for example, having a team that’s focusing on the Hispanic medical community. You know how they say all politics is local? Well, all life insurance sales are local too. That’s the type of program that we’ve now expanded across our agency force and it’s paying good dividends in sales for us.

The business case for diversity is so powerful. We’ve already got several states where the majority of children being born are not white. It’s anticipated that by 2040, the U.S. is going to become a majority minority country, so the majority of our citizens will be non-white. To me, one of the most interesting things about this is if you look at the academic research on group decisions, a cohesive group will create decisions quickly, but a group that has more diverse opinions, although it will take a little longer to make decisions, will frequently make better decisions because it will consider more options. That’s part of the business case for diversity. And diversity isn’t just skin color, gender and age. It’s diversity of thought at its most fundamental level.

Generation X is turning 40. Do you see any larger sales challenges reaching out to this next generation of clients? Gen Xers can be a pretty cynical bunch.