Betting on the inevitability of death and higher taxes, life insurance companies are signing on thousands of agents.
The hiring is not a response to positive results. In fact, sales of death benefits have been morbid in recent years. But insurance executives see potential in consumers rattled by the crisis and possible tax increases that would make life insurance an attractive hedge. And they need fresh bodies to make their case.
"There's an old adage that life insurance is sold, not bought," said Mark Pfaff, executive vice president of life and agency operations at New York Life Insurance Co. "That's the way it's always been and that's the way it is now. It's not something we go out on the weekend and purchase at Best Buy."
After decades of decline, the ranks of life insurance agents swelled by 7,434, or 2.3%, in the last two years, according to LIMRA, an industry trade group.
American General Life and Accident, a unit of AIG, said it will add between 4,000 and 6,000 agents or independent distributors by 2013. To reach that goal, the Tennessee-based firm will launch a cross-country hiring campaign today in which a bus of recruiters will drive from Baltimore to Los Angeles, collecting resumes in 13 cities along the way, including stops in Pittsburgh, Orlando and Houston.
Insphere Insurance Solutions Inc., a health insurance company that started selling life insurance in January, has hired 700 agents this year, swelling its ranks by a third. The company, which is backed by Blackstone Group, Goldman Sachs and Credit Suisse, may add another 3,000 or so agents in the next five years, according to CEO Phillip J. Hildebrand.
New York Life, the No. 4 life insurer by total premiums, plans to hire 3,000 agents this year, which will result in about 400 new positions.
While, Northwestern Mutual, No. 2 in life insurance market-share last year, is on the hunt for 2,300 agents and 2,500 interns by 2011. In the past five years, its ranks of life insurance salesmen have swelled by 12%.
"We see the environment being very healthy for us," said Paul Steffen, vice president of agencies at Northwestern Mutual. "There's a strong need in the market now for people to plan and we see a much greater emphasis on long-term thinking."
Much of the hiring is for old-fashioned affiliated agents, salesmen who only handle the products of a single company. The exclusive arrangement lost favor in the 1980s and 1990s, as a crowd of independent brokers and financial advisors flooded the market.
Since 2004, almost 20,000 affiliated agents have entered the business, a 12.1% increase, while almost 17,000 independent salespeople vanished, a 10.5% drop.
-- Related: The Business of Life Insurance Gets Some Youth
Back to Life
The life insurance business has not been particularly hot of late. Between 2007 and 2010, annualized life insurance premiums plummeted 18.9%, according to LIMRA. And ownership of individual life insurance has hit a 50-year low, as the recession spurred companies to cut insurance benefits and incited people to pay off debts and funnel money into savings. An August study by LIMRA found that almost one-third of U.S. households have life insurance policies.
But insurers are readying for a rebound. Annualized premiums increased by 9% in the first half of the year, according to LIMRA. And industry executives said the volatility of capital markets, coupled with the current financial conservatism, will steer consumers back into life insurance policies. A quarter of respondents in a recent LIMRA survey said they plan to buy life insurance in the next 12 months.
"The need is as great today as it was in 2006, but people have woken up to the fact that there's a lot of risk in the marketplace," Hildebrand, at Insphere said. "Now, they know there's a dark side out there."
Hildebrand, who refers to life insurance as "a controlled way of helping people save," noted that the middle-class consumers offer a particularly ripe market. Not only are they approachable and easy to sell to, but they were somewhat abandoned by an industry chasing the more lucrative accounts of affluent customers.
The possibility of the expiration of the Bush administration tax cuts and the likelihood of a relatively high new estate tax is also feeding demand. If Congress does not draft new plans, inheritances over $1 million will be taxed up to 55% starting next year. Life insurance, if set up correctly, can provide a route around those charges.
"If we're driven by a consumer need, there's no better time for us," Scott German, AGLAs chief distribution officer. "The market is really screaming for us to hire."
And companies that have added to their sales ranks are reaping the rewards. As it was signing on hundreds of new agents in the first half of the year, New York Life recorded a 47% increase in life insurance sales.
Insphere, which is new to the business, has sold 1,500 life insurance policies a month so far this year.
Related: The Business of Life Insurance Gets Some Youth
Write to Kyle Stock