Having reached a high point in 2008, the retention rate for new life insurance advisors dropped last year. According to the Life Insurance Marketing and Research Association (LIMRA International), only one in three advisors managed to stay in the business past the crucial four-year mark. What’s more, one in two recruits leaves the industry within the first two years.
In its recently published Canadian Sales Force and Retention 2009 report, LIMRA revealed that 2,365 captive agents left the business last year. However, the industry added 2,900 new recruits, which brings the net growth rate for Canadian career sales organizations up to 4%. This is a significant improvement over the 1% net growth rate reported in 2008.
“Companies efforts have increased over the past two years. In 2009, companies recruited 24 agents for every 100 agents under contract at the start of the year, compared with 21 agents in 2008,” says the LIMRA report.
Despite this recruiting effort, the four-year retention rate remains low. After steady growth over the last few years, the retention rate for captive sales agents dropped from 34% in 2008 to 31% in 2009. Between 2007 and 2006, the rate had remained steady at 32%.
To arrive at these results, LIMRA surveyed ten companies that employ 12,500 career agents in Canada, including Great-West Life (which includes London Life), Sun Life Financial, Industrial Alliance, Desjardins Financial Security, RBC Insurance, and La Capitale. LIMRA also collected data from FaithLife Financial, The Knights of Columbus, and State Farm Insurance. The number of career agents working for each of these companies ranges from 35 to 3,300.
Margaret Honan, Senior Analyst of distribution research at LIMRA, says that the rate may fluctuate because of retirements or due to the addition of new survey participants. But in the present case, she says that it is the financial crisis that is to blame. Furthermore, she believes that the retention rate should recover in 2010. “The four year retention rate has increased steadily over the last five years,” she comments.
In a weak economy, she suggests that workers who rely on commissions tend to look for salaried positions. The pressure on retention may also come from the insurer, which could be terminating contracts of agents that do not meet minimum production criteria.
The median four-year retention rate is 25%.For some players, these results are not very encouraging. The best has a 91% rate, and the worst a 6% rate.
The turnover rate is also suffering because of poor retention. The career agency system in Canada had 14,860 representatives under contract at the beginning of 2009. With 2,365 terminations recorded at the end of 2009, the turnover rate has increased to 16% in this segment. This result is similar to turnover rates in previous years.
“Those [who come into the industry] with no experience think, ‘I’ll make a lot of money.’ Then the tough [economic] times come and that’s really not the case,” says Ms. Honan. “The younger generation has different expectations than previous generations. They expect training and mentoring. The companies that recognize this will do better in the future than companies that are recruiting the old way, only showing the easy money side of the business.”
LIMRA is offering its own solutions to the industry to help with recruit selection, including its own popular Career Profile Plus product. But Ms. Honan points out that it is important to use more than just a test to select prospects for a career in the insurance business. “One test is not enough,” she comments. The more tests and selection tools an insurer uses, the higher their retention rate will be, she says.
Stéphane Beaumier, Regional Vice President of the career channel at Sun Life Financial agrees with this finding. Even a perfect score on the Career Profile Plus test does not guarantee a recruit’s success, he says. Mr. Beaumier points out that only about a quarter of those who pass the test are made for the job. Still, the test remains indispensable. “Organizations who use it obtain a better retention rate,” he says.
Like Ms. Honan, he says it is essential that the selection process consist of several steps. “After having passed the LIMRA test, our recruits spend four to six months going through various stages of the selection process before they are contracted,” he explains.