Joe Monk sits down for a breakfast meeting in a quiet restaurant in the northern stretch of midtown Manhattan. It had been raining miserably all morning, but you wouldn’t know it from Joe’s sunny demeanor. From the onset, this is a man who doesn’t just like talking about life insurance. He loves it. And not just in the way that serious craftspeople enthuse over their craft. He is one of the industry’s true believers in the nobility and in the mission of life insurance to help as many people as possible, in addition to being a sensible financial product, and a great thing on which to base a business. For him, his job is based around a single focal point: for State Farm Life to follow a balanced business approach both so it can insure more people, but also so it can insure people better.
He is a big fan of following industry trends, which becomes apparent when he moves right into a deep discussion about the tidal forces that are driving the life insurance industry’s more pressing realities. For example, the demographic shift among its customers and its producers, whose average age is 57 years old and increasing year every year. On one hand, Monk says, this presents a challenge because over the next 10 years or so, the customers to whom so many life insurers sell to will enter retirement, and will have a whole new set of financial realities. But that is mainly a sales problem. The bigger demographic challenge is: what happens when the bulk of the industry’s sales force retires? Right now, it doesn’t look like a whole lot is being done to backfill the vast amount of experience preparing to leave the business for good.
“We have 26.2 million insureds at State Farm,” Monk says, noting that the company has about 10 years to increase premium and volume before the demographic issues facing the entire industry become too big to ignore. Part of it, he says, is the nature of the distribution system having changed over from a career model to an independent one, which has impacted the industry in two ways: insurers are recruiting a lot less manpower into the business, and the distribution system itself has skewed to serving higher net-worth clients, leaving the middle market underserved. “A lot of that happened during the de-mutualizations in the 1990s and early 2000s. There was a reactive move to chase financial increases, as agents became more focused on their commissions,” Monk says.
Despite that, Monk remains bullish on the industry’s prospects in general, even regarding the middle market. While he hesitates to speak on behalf of other industry leaders, he does note that he’s seeing signs that other companies are noticing the same trends that he has noticed. “There is a resurgency of the affiliated agency arena,” Monk says, referring to the rise of hybrid agencies that remain independent but still retain certain characteristics of career-based arrangements as well. Companies are reconstituting to hiring more field forces. That’s a good sign to foreshadow some good outcomes.”
This is certainly true of State Farm, which Monk says already has 18,000 agents and is looking to grow more.
But that leads to another challenge. Supposing a wave of new blood is brought into the life business, bringing them up to speed will prove difficult, especially if the veterans of the industry are setting to retire. Monk mentions how mentoring will be an important part of transferring the experience of one generation to the next—indeed, young producers are regularly teamed up with veterans at State Farm—but that only works to a point.
“There are aspects of past producers’ experience that are still relevant today, but not all,” Monk says. “We need to discern what to pass on to the next generation.” Case in point: an appreciation for relationships. Monk notes that all producers need to develop client relationships in new ways, taking experience from tenured agents and moving it forward to a new generation of producers and their clients.
“Our tenured, more experienced agents have a more long-term view of life insurance,” Monk explains. “They have a patience they have developed over the years. They were at the forefront of their clients buying things like permanent life insurance. They saw the self-discipline it took for customers to buy a monthly policy. Agents were appropriate for that kind of life insurance purchase. Tenured agents also appreciate creativity and the tasks required to build a successful practice. These are all of the things they need to pass on.”
A special challenge to getting new producers up to speed, however, are major changes that have happened among younger buyers. For Generation Y, the traditional series of life developments that typically led to the purchase of life insurance—marriage, buying a home, having children—have become jumbled. Millennials are living with their parents until they are 30. They are getting married later, if at all. And having children might come at any time. For some customers, this pushes back when they first feel the need for life insurance. For others, it simply makes their purchase something springing from a jumble of life developments.
“This is not new to us,” Monk says, “and we need organizations within the life insurance industry to be adaptable to that. We need to appreciate the evidence that it’s not just the Millennials and that generation’s characteristics. Half of people age 65 and older are active on the internet. This is bringing a major change in buying habits, which is spilling over to other generations. It reflects that commercial realities are not as linear as they once were. This is the kind of world we must prepare for, one that transcends generations.”
But at State Farm, what does it mean to be more adaptable? To Monk, it comes down to offering a blend of services so that insureds who want to customize their life insurance can do so on their own. But it also means providing the kind of agency support for clients who want personal guidance with their life insurance planning.
“Our agents are a critical component of this, but they are not the only component to connect with our customers,” Monk says. He mentions how State Farm’s property & casualty, life and banking operations all offer platforms by which a customer can connect with the company at any time of day. During regular business hours, there are live agents to speak with. After hours, customers can access their accounts through State Farm’s website (www.StateFarm.com) or through a contact center—a call center that local agencies route phone traffic to when the agency itself is not open. Through these avenues, customers can make a mutual fund purchase, adjust their accounts, make bank deposits, pay an insurance premium and more. Monk sees all of this not so much as chasing a market need, but as ways to open up new connection possibilities with customers.
“This will not be comfortable to every agent, but State Farm agents see this in the market every day, and out agents themselves are strong internal drivers for these kinds of improved customer capabilities,” Monk says. “With the agents on board, there is automatically more of a buy-in and more of a push to get the organization in that direction. Integrating these things is not easily done, but there is an enthusiasm for it.” This, Monk explains, leads to the coveted “win-win-win,” in which the carrier, agent and customer all benefit from the changing dynamic between insurer and insured.
With this in motion, it would seem like Monk has a pretty good plan for facing the industry’s evolution. But that still doesn’t make him immune to some of the larger concerns that vex life insurance professionals everywhere.
“This industry features products and solutions that help households get through crises and create a path to self-determine their financial future. I worry that whether it is regulatory, legislative or awkwardness within the industry to convey that opportunity effectively, the industry might get marginalized in its quest to help people make the decisions that affect their own financial future,” Monk says. “This industry does so much to alleviate the government’s need to guarantee incomes for the rest of our lives. There are definitely forces at work that could wipe away all of that.”
Life insurance is a rewarding industry, Monk points out, because its professionals are helping people manage their risk, protect against unforeseen events and make much-needed financial plans. But all of that will not matter, especially in the face of sudden regulatory or legislative change, if the industry doesn’t do a better job of managing customer expectations.
“We need to be institutionally honest,” Monk says. “ We are a for-profit company. We are passionate about what we do, but the customer pays for us to do it. How we do it is an opportunity to us. We all need to be careful about over-romanticizing this mission we have in the industry. We can do a lot better on that, and that institutional honesty needs to be in our conversations with our customers.”