What Really Drives Life Insurance Sales?

I spent 27 of my 31 years in the life insurance industry working as a career agent.

Throughout my career, I attended an average of one sales/marketing meeting per week or more than 1,000 meetings.  Yet, I maintained my independent thinking and did my research. My goal was to do the best job for my clients.

My reasoning was simple: I knew I could not be fired for doing the right thing.

So, what is the right thing?

According to Doug Meyer-Cuno, “Doing the right thing generally means making decisions not based on your own personal needs, that don’t expand your popularity, or enforce your personal beliefs.”

What Does “Doing the Right Thing” Mean in Life Insurance Sales?

To even attempt to answer this question, let’s look at the history of life insurance industry sales standards.

Suitability: Under this standard, sales agents are expected to recommend only insurance policies that are “suitable” for the client’s objectives, budget and timeline.

The insurance producer must provide a completed suitability questionnaire before making any suggestions, and there must be a reasonable basis to believe the consumer has been informed of all policy features and benefits.

Best interest: This standard requires sales agents to put the client’s interests first and ahead of theirs. Best interests can sound like being a fiduciary, but it is not.

Fiduciary: In my opinion, you’re either a fiduciary or you’re not.

Why Do Consumers Complain?

When I read ThinkAdvisor, I often see articles about consumer complaints and litigation. If you have been around for a while as a producer, you read the lines and between the lines.

I can visualize the “sales rap” associated with the complaints. This does not mean that all the complaints are justified, but I have witnessed these types of sales that produce justified complaints.

Unfortunately, most retired producers will agree that we have bad apples, like any sales industry.

I reviewed the complaint articles published lately in Think Advisor, and these terms often show up:

• Seeking financial “advice.”
• Breach of fiduciary duty.
• Fiduciary standard.
• Suitability.
• Negligence.
• Elder abuse.
• Liquidity of cash values.
• Permanent insurance.
• Cash-value life “advice.”
• Permanent life insurance
• Need for life insurance.
• The 30-day right of rescission.

Inside the Disputes

Here are some of the themes behind the recurring terms:

The financial professional’s role: Are we salespeople, advisors, or fiduciaries?

The client: Is the client of a life insurance agent who is not a fiduciary the consumer or the insurance company?

Illustrations: Do they help or confuse clients? How many clients sign documents stating that they read and understand the illustrations without either reading or understanding the illustrations?

Company and industry titles: Are our titles often deceptive, confusing, or misleading? Can they be used to justify and manipulate consumers into thinking that they are experts and sit on their side of the table?

Our fundamental nature: Can life insurance salespeople make authoritative recommendations and be held to the recommendations if they have an arm’s-length, buyer-beware relationship with the consumer?

There is an old saying: Compensation can drive behavior.

Levels of Abuse

As the industry has evolved, sales training has become more assertive, and sales rep raps have become more sophisticated.

The process of creating a questionable life insurance policy sale usually involves the setup, the mark, the rap, the “shiny object,” post-sale manipulation, and the sales reinforcement process.

The setup: I am a … financial consultant, financial advisor, financial planner, certified financial planner, tax planner, wealth planner, trusted advisor or fiduciary care advisor. Or I am your buddy, or your insurance consultant.

The mark: The mark is a prospect. Also called “the check writer.”

The sales rap: The rap is well-honed and usually based on fear or greed. Fear is death, while greed usually revolves around cash-value features and benefits.

The “shiny object”: The shiny object is the policy features and benefits. Some of the benefits include beating the IRS on withdrawal taxation, protecting assets, and optimistic projections about high investment returns that usually do not happen.