With problems come opportunities. It's always darkest before the dawn. When one door closes, another opens. A half-empty glass is also half full.
Such tried-and-true aphorisms apply especially well to the current life insurance industry. Consider the following:
o In 1986, this industry sold 17 million new individual life insurance policies. Between 1986 and 2006, the number of households with children increased by almost 13 million. In 2006, we sold 10 million new individual life insurance policies -- a 40 percent decrease. Premiums are increasing modestly, but on an inflation-adjusted basis they have declined more than 20 percent over the past 20 years.
o In 1986, there were 186 million individual life insurance policies in force. In 2006, there were 160 million individual life insurance policies in force.
o In 2006, 68 million adult Americans had no life insurance.
o At the rate the size of the current field force is shrinking, by 2017, there will be far fewer agents than just 20 years ago.
Each of these points, however, can be made into a positive.
1. The number of new policies sold is declining while the number of households with children is growing. This is actually an opportunity. There are now more people who need life insurance, disability income, long term care insurance, and retirement planning than ever before. No one has repealed the mortality tables. Everyone dies. Or, to put it more gently, in the words of the late and great Ben Feldman, "No one has a lease on life." Very few people today have enough money to provide adequate financial security to their families and businesses at their death, disability, and retirement without insurance products and the services of a professional agent or advisor.
There are approximately 6 million individual disability income policies in force in this country, and two-thirds of all workers have no employer-provided disability income insurance other than workers' compensation or Social Security, if they qualify.
2. There were only 160 million individual life insurance policies in force in 2006. That says two things to me: First, it could indicate that lapse rates are so high because no one is calling on policyholders to help them keep the policies they have already bought. And with the increasingly high percentage of term sales, there is little incentive to preserve the business.
The second implication naturally follows the first -- this creates a great opportunity to put more policies in force. There are millions of people who bought life insurance at one point and then dropped it, primarily because no one called on them to review why they had bought it in the first place, to explain why it might still be needed, and to sell them more if appropriate.
3. 68 million adults had no life insurance of any kind. Contrary to what you might think, a significant number of them were earning more than $100,000 per year -- yet another lucrative opportunity for you.
4. At the present rate of attrition, we will have fewer producers in 10 years. The average producer is in their 50s, and with the number of people entering the ranks each year versus those retiring, numbers will go down over the next decade. This is a perverse blessing because, while it does mean the advantages of less competition for those who remain, it also means a shrinking industry. We run the great risk of reaching a reverse "tipping point" where people will say, "Well no one is selling insurance any more so that must not be a good thing to do."
People will buy our products only when someone is there to help them understand the need, review their options for addressing the need, and close the sale. If "no one is doing that any more" the American people are the losers.
So, while there are many negatives and danger signals flashing in our industry today, there are an equal number of great opportunities as a result. We need only discipline ourselves to take advantage of the opportunities by making a commitment to a certain number of new clients each year supported by a sound marketing plan to reach them. The market is there, just waiting to be tapped.
David F. Woods of MassMutual previously served as NAIFA CEO and president of the LIFE Foundation.
