Premier Business Magazine, Fall 2007
By serving the middle-income market ignored by most of the life insurance industry, Primerica offers a unique opportunity to build your own business.
For most families, life insurance is a topic that flies under the radar. It's not a part of routine conversation at the dinner table. And chances are beyond remote that you're thinking about calling a life insurance agent today for a quote. You probably don't know who to call. Life insurance just isn't high on the list when so many other things compete for your attention. But there's no question that life insurance can help change lives.
For a family who has experienced the death of a loved one, insurance becomes the most important catalyst to restoring financial stability. It's critical because during a personal tragedy, the last thing any of us wants to think about is financial uncertainty. To a grieving family, life insurance can bring certainty that the mortgage can be paid and the children's college tuition can be covered.
Life insurance plays an important role in society. It's a cornerstone of personal finance. And what few may realize is the life insurance industry is positioned for incredible growth in the coming years, as a large segment of the population remains seriously unprotected. For entrepreneurs seeking a way to plant their flags in an industry primed for growth, marketing life insurance has lots of appeal. And one company has a decisive edge in the competition to maximize this opportunity.
Primerica Takes the Lead
For three decades Atlanta-based Primerica has fine-tuned an approach to marketing life insurance that centers on financial education for middle-income families. Primerica's product term life insurance — is simple, affordable and, above all, relevant to the needs of the average family. Add a distribution model that encourages representatives to take an ownership mentality, and the business works; Primerica boasts more than $600 billion of term life insurance in force, serving clients across North America and Spain.
But Primerica hasn't scratched the surface in a market that's bursting with opportunity, as more families seek answers to their needs for life insurance protection. And Primerica is taking the lead in the industry by reaching out to a market that very few other companies are equipped to serve.
Understanding the Middle Market
According to LIMRA International, a financial-services research and consulting association, roughly 68 percent of U.S. adults have some life insurance, but most lack enough coverage to weather the financial storm that results from the loss of a breadwinner. Most Americans — three-fourths — believe having life insurance is important, and 44 percent of American households believe they need more life insurance; 27 percent expect to purchase more in the coming year.
But 78 percent of consumers don't have a personal insurance agent, and almost one third indicate they have not been approached to buy life insurance. A large portion of these overlooked consumers make up the middle market, defined as households with incomes of between $30,000 and $100,000.
So Why Aren’t Life Insurance Agents Selling to These People?
There's a need in the marketplace, but many life insurance companies aren't reaching this group of consumers. Why this disconnect? There are a couple of reasons:
First, there are significantly fewer agents selling life insurance than there were 30 years ago. The March/April 2005 issue of the GAMA International Journal, a professional development journal for the insurance industry, reported the number of recruits entering the industry has declined 46 percent since 1975, reducing the number from 55,000 to 29,968. And with the average agent age at 56, this problem continues to escalate as these agents near retirement. Meanwhile, the industry is still looking for the next generation of life insurance agents to step forward.
Another reason the middle market isn't getting the attention it needs is because agents are busy targeting affluent clientele. "Agents tend to focus primarily on the `mass affluent,'" says Rondol Davidson, LUTCF, CLU, CSA, of Davidson Financial Services, in the June 5, 2006, issue of Insurance Advocate. He says agents are going upstream to find clients because most life insurance companies don't market to less affluent buyers.
There's a simple explanation for this behavior: Insurance agents earn higher commissions when they work with wealthy clients, often selling more complicated insurance products that bring together variable investments and death protection.
Where does that leave ordinary middle-income families? They're unprotected — or seriously underinsured — and uninformed about one of the most important pieces of any financial program. Primerica has gained a foothold by focusing on the middle market and offering simple, affordable term life insurance, the type of insurance that's relevant to the needs of the average family.
Closing the Knowledge and Protection Gaps
Because the middle market is not being approached to buy life insurance, consumers don't understand the products available, nor do they know how much coverage they should have. "If people don't understand our product, they won't buy it," says Robert A. Kerzner, president and CEO of LIMRA International in the association's survey results.
If consumers aren't purchasing, a protection gap results. For the overall U.S. population, the protection gap for replacement of pre-retirement income is $11.3 trillion, according to the study Penetrating The Middle Market: Clearing The Distribution Hurdle by Conning Research and Consulting Inc. "The 40 percent of the population defined as middle market has a protection gap of 56.5 trillion — 58 percent of the total," says George P. McKeon, an analyst for the consulting firm. "This is a huge opportunity for insurers."
Primerica continues to forge ahead in this untapped market with affordable term life insurance and a mission to change lives. Clearly, the need for protection exists among middle-income families. All that's missing is more representatives to connect the underserved middle market with answers to their financial needs.
The Key: Face Time
LIMRA's Kerzner notes that insurance is not a product people buy on their own. "Unless our industry can get in front of more people to help them make a decision, this gap will remain unfilled," he says. "We need to spend more time with people, answering questions about how much insurance they need and what kind to buy. We need to help them see how life insurance fits into their total financial plan."
But in today's e-commerce "Information Age," doesn't the Internet make face-to-face distribution obsolete? Not when it comes to financial products and services. According to Duane Morrow, Primerica Executive Vice President of Marketing, old-fashioned conversation is still the best sales tool. "I think the industry really bet on the Internet as the way of the future for marketing life insurance, but it hasn't materialized." Morrow acknowledges the proliferation of insurance Web sites offering instant quotes. "But what if you have questions about what you're buying? What if you have a claim or need help with your policy?" he asks. "Can a Web site help you like your representative can?"
A People-Powered Business
As Morrow points out, face-to-face, personal service is a mainstay of Primerica's business. The company is on a growth trajectory that defies the rest of the life insurance industry as more entrepreneurs are discovering the advantages of the Primerica Opportunity. And the new era of the entrepreneur is likely to continue for some time.
According to Web site Monster.com's Monster Intelligence Financial Services Professionals Report. "Demand for financial services ... has never been greater. As a result, a career in this fulfilling and lucrative field has become an appealing option, particularly for those seeking an opportunity to help — while enjoying potentially high income — flexible work schedule."
Cracking the Code for Entry into the Life Insurance Business
One unique feature of the life insurance industry is that agents must be licensed to do business. Obviously, the most compelling reason to require licenses for agents is to ensure they're highly qualified to handle a client's finances. Obtaining a life insurance license requires completion of licensing classes and an exam administered by the state in which the agent does business.
With abundant opportunities to service a clearly defined target market that desperately needs insurance coverage, Primerica is leading in helping new candidates become certified. For $99, candidates can join Primerica and, with a $25 monthly fee, they have access to powerful pre-licensing training tools such as the life online exam simulator and many other business-building tools. Additionally, all costs associated with the life insurance exam and the securities exam are included.* "If candidates actually follow our plan by attending pre-licensing classes and scoring well on the life online exam simulator software, we guarantee they will pass the exam or Primerica will pay for the retest," Morrow says. "You can't go anywhere in the life insurance industry as an independent contractor and have this great of an entrepreneurial roadmap for licensing success."
Unique Compensation System Accelerates Financial Independence
Because Primerica has carved its niche serving the middle-income market, to make selling term insurance attractive it's had to develop a compensation plan much different from traditional insurance companies. "One of the most important innovations in our business was devising the hierarchical structure that allows us to adequately compensate people so they can make a good living selling term insurance," says Mark Supic, executive vice president of corporate relations. "The magic of Primerica is this design."
Leveling the Playing Field
In traditional firms, getting ahead is often based on office politics and who you know. Primerica stands out from the competition in this regard because the company publishes advancement guidelines that define the requirements for moving to the next level. "There's no glass ceiling or corporate politics in play to get ahead," Morrow says. "It simply doesn't exist here. We're a business built on a foundation of independent contractors who come from all walks of life. Advancement is based solely on your efforts and what you do in Primerica. So if you do the building and production required, you can advance no matter who you are or where you come from. We're encouraging our leaders to build their own `company within a company' in this gigantic, untapped middle market."
Redefining Business Opportunity in the 21st Century
Primerica has the market, the products and the infrastructure to create one of the most attractive business opportunities out there. Over the course of three decades Primerica has set the standard for growth in a life insurance industry struggling to adapt. The company has created a culture of changing lives in the overlooked middle market through personal service and simple, affordable term life insurance. And while the first 30 years have been exciting, the next 30 are filled with even greater opportunity for financial gain.
Primerica by the Numbers
- 6 million clients across the United States, Puerto Rico, Canada and Spain
- Processes nearly 30,000 life insurance applications each month
- Average policy face amount $282,500
- $610 billion term life insurance in force
- $2 million in death claims paid each day