Brian Ashe on life insurance: "The premium is always less than the problem."

SMA: What challenges does the life insurance industry face today?

Ashe: Consumer education. I sit on the board of the Life and Health Insurance Foundation for Education and 40 percent of the adults in this country own zero life insurance. Of those people who do own life insurance they have enough to replace about three times their earnings. They should probably have more like 10 times their earnings. Second of all, when we have four out of 10 adults not having any insurance, the perception of risk needs to be accentuated because if people think they aren’t at risk, they are. Twice over the past 10 years, we’ve had these huge reversals in the stock market. Heck, if you are 55 or 60 years old and you are thinking of retiring and all of a sudden, 40 percent of your 401(k) is gone and then you die, that money that your spouse was counting on is now gone. So consumer education to help people understand both the risk that they face and the fantastic array of products that are available to help solve those problems, I think is probably one of biggest challenges that the industry faces.

SMA: The number of life agents is dwindling. What can the industry do to attract younger talent?

Ashe: I believe there are only about 30 companies left in the U.S. that actually recruit and train new agents and there are probably only three or four that do most of it. So if the industry would like to see more people in the business, then the companies are going to have to invest more in the recruiting and training of new agents. A lot of companies feel that it’s better to just invest in attracting experienced agents. But if all of the companies are doing that, then there is only a finite pool of people…and pretty soon there aren’t enough people to go around.

The second thing is, they might think about different ways of compensating new people, because traditionally, the four-year survival rates for new agents has been on average about 11 percent. Well, if you are only surviving one out of 10 people, that’s a lot of money to be paying to only have one advisor remain in the business after four years. Maybe some sort of additional subsidization so people don’t drop out because this business is a very tough business to get started in, especially the first two or three years. That would probably be helpful.

SMA: Does this any impact on an advisor?

Ashe: From the standpoint of an existing advisor, looking at the recruitment of new people I would welcome it. I welcome the competition, because I think we are made better by competition. And second of all, I would welcome the addition of new agents simply to accelerate the process of consumer education. Certainly, from a legislative and regulatory standpoint, if we have more voices to help to educate regulators and legislators about the products and the needs of consumers. I think the industry does better. Ten years ago NAIFA had almost 140,000 members. Now it’s down to about 50,000. That’s a huge difference.

SMA: People want to buy, but there aren’t enough agents to reach them, particularly in the middle market. What can you and the industry do to reach them?

Ashe: There are two things happening. One is, we see an increase in direct market sales, where direct marketing companies are filling some of the void for purchases in the middle market. I don’t have a problem with direct market sales. When consumers have indicated that they want to purchase either over the Internet or by phone, that’s fine. I still think there are probably 70 percent or 80 percent of the public that would like to have face-to-face assistance because it can be a complicated business.

And very frankly, the companies are going to have to invest in hiring and training people and compensating people to address the middle market. When their recruiting philosophy is let’s hire experienced agents, that’s to save money because they don’t have to train them. The second part of it is, they want experienced agents because the companies want to go after the wealthy marketplace. They want to go after the top 15 percent of consumers. And while you can certainly understand some of the economics behind it, if you have a whole bunch of companies crowding into that top 15 percent, none will receive any huge share of that marketplace because it can only be carved up so many ways. Consequently, companies would benefit by spending a little bit more time in the middle and the upper middle marketplaces because it’s where 85 percent of our population is.

Do you know who sells more life insurance policies than anybody else in the country? It’s State Farm, which is a multi-line company. Some of their policies are smaller than say, a New York Life or Northwestern Mutual, but if you looked at policy count, they sell about 10 percent of all of the policies that are sold in the U.S. To me, that’s kind of interesting, because they are actually out seeing the people, because they have to buy homeowners insurance, car insurance and so forth. So when we do get out among potential buyers, they do buy.

We would also do well to spend more time with the middle marketplace because life insurance receives favorable taxation since there is a social good associated with it. If Congress were to feel that we weren’t serving the marketplace as well as we should, it would present a challenge to continuing the benefits the life insurance industry enjoys. So we would help ourselves by spending more time with the middle marketplace.