It is safe to say that the life insurance industry is adrift in a sea of problems and challenges. The ongoing financial crisis has exposed what are – at best – questionable decisions by the management of a number of companies. Great icons of the industry – Hartford, Prudential, Lincoln National Corp. and Principal Financial – have been humbled to the point of restructuring in order to beg for a federal financial bailout.
Did I say “humbled”? Here are the dismal facts The consulting company, Conning & Co. has estimated that the capital and surplus of the insurance industry declined in 2008 by almost $80 billion dollars, raising the very real question of whether the insurance industry has the capability and credibility to meet its obligations and promises.
Need more? The 24-stock KBW Insurance Index fell 48 percent last year, with MetLife down 43 percent, Prudential off 67 percent and Hartford plummeting 81 percent. Meanwhile, industry employment declined in 2008 as did the sales of life insurance and variable annuities. While the year saw the volume of fixed annuity sales increase, (for the first time in two years) the question remains as to how much of the “new” sales were the result of fresh funds coming into the industry or simply money shuffled from company to company (as I previously blogged about).
Moreover, the insurance industry seems be to losing its political muscle. The impotence of the industry was clearly demonstrated when it was thoroughly thrashed by the broker dealer community in the SEC 151a battle. Despite a proposed SEC regulation that is, on its face, both illogical and quite possibly illegal, the insurance industry lacked the clout to block its enactment. It’s a clear indication that these are difficult problems that challenge the skills of even the “best and brightest” industry leaders and company executives. (Assuming the “best and brightest” populated insurance management.)
The Worst May be Yet to Come
Yet, despite all of these cataclysmic issues, still another problem confronts the industry that is less obvious but more insidious and the life insurance industry is either unable or unwilling to recognize and deal with it. This problem, if left unattended will corrode the very base of the industry’s success – the ability to distribute products that are not purchased, but must be sold. For an industry that once prided itself on the quality, extent and success of its agent training system, there is today a dearth of agent training, and that is bound to have a negative impact on the industry for years to come.
Companies will claim that they offer extensive training and point to hundreds of meetings and thousands of dollars spent “training” agents. That may be true, but unfortunately these meetings teach mechanical detail and structure of the policies, not the real selling process. Agents do not learn the crucial ABCDs of salesmanship: how to effectively prospect, identify a need, offer a solution and make the sale. It’s the automotive equivalent of General Motors teaching men and women to be mechanics—but then expecting them to be good car salesmen. If the insurance companies were honest, I mean truly honest, they would admit that the real motivation for these “training” meetings is merely to meet regulatory and compliance objectives, not true sales training.
Can We Learn from History?
It has not always been that way. In 1967 Perrin Stryker wrote a book titled, “The Incomparable Salesman.” It was an excellent book that explored the extraordinary ability of individuals who were able to sell copious amounts of a product that the consumer did not want to buy. Truly the insurance agents of the time were incomparable salesmen (with one distinct exception of an individual who was an agent at the time), but they were not born that way. Nowhere is it written that salesmen are born, not made. The life insurance industry built a distribution system and filled it with incomparable salespeople who were capable of selling a complex and difficult product because it invested heavily and wisely in the training and development of the agent’s sales ability.
Training sessions were many and mandatory embracing one-part product and nine-parts selling. (Just the reverse of what we see today.) Agents were brought into company headquarters for up to a month of real training. And their schooling didn’t end there, as company General Agents were required to provide continuing training and education. In short, the agent learned how to make the right sale, with the right product in the right way.
Admittedly, that was another day in another world. But with today’s sophisticated needs and complicated financial products, the need for true agent sales training has never been greater. Yet, it is virtually nonexistent.
What Should be Done
It may not be possible to go back to the way things were, but insurance companies should make an investment in properly and completely training agents even though the financial climate may predispose them to radical cost cutting. It’s in their own self-interests, the benefit of the agents who sell their products, and most importantly, the consumers who buy them. This is a time when the insurance industry may be inclined to tighten belts and slash expenses, but to delay the challenge of properly training agents is tantamount, I think, to shooting oneself in the foot—or in this case, the industry’s collective feet. Insurance agents are the lifeblood (spelled N-e-t-I-n-c-o-m-e) of the industry, and training should go beyond teaching agents how to tell about the product and teach them how to sell it. As they say, “Telling isn’t selling!”
An even greater need is to teach agents how to sell company products properly. The significant, time-consuming and expensive regulatory and consumer litigation issues that have rocked the companies in the past few years can be traced directly to the agent’s lack of knowledge in understanding the suitability of a product for a consumer’s specific situation and need. This has resulted in bad sales made by good people who were simply poorly trained. If the agents had been properly trained in the appropriate sales practices, not only would more sales have been made, but the regulatory and litigation issues could have been avoided.
At the heart of the problem is the fact that, unlike years ago, most insurance company marketing departments are bereft of individuals who know how to sell, let alone teach others to sell. They are good at running through an 80-page PowerPoint pitch telling about the product, but not what the product is about. But look here! Thanks to the Internet, the effort to properly train agents would not be either terribly expensive nor difficult and the return would be well worth it. A Google search for “agent sales training” returns over 350,000 hits. There are literally hundreds of effective prospecting, problem solving and sales skill programs available that could be used by companies, agencies and agents.
The insurance companies should identify those programs that would fit the philosophy of the company and be effective. Once done, the companies should subsidize and mandate the completion of these programs as a contractual requirement for doing business with the company.
Some will argue that because most of today’s agents are independent contractors that the burden of learning proper sales techniques should fall on them. However, others will suggest that the companies have more at stake and if they seek individuals to sell their products it is their responsibility (and benefit) to see that those contracted to sell them know how to do so and how to do it properly. Real, honest-to-goodness sales training of today’s insurance agents should be viewed as an investment, not an onerous task, and if made it will allow the insurance industry to once again build a distribution system of incomparable salesmen.