Is Selling Insurance a Profession?

A “profession” is defined by Merriam-Webster’ Dictionary as:

1: the act of taking the vows of a religious community

2: an act of openly declaring or publicly claiming a belief, faith, or opinion : protestation

3: an avowed religious faith

4: (a) A calling requiring specialized knowledge and often long and intensive academic preparation.

(b) A principal calling, vocation, or employment.

(c) The whole body of persons engaged in a calling.

A different definition from Word is more succinct: “a paid occupation, especially one that involves prolonged training and a formal qualification.”

A good friend sent me an e-mail regarding an article I wrote entitled “Doing the Right Thing” with the “Right Thing” being offering clients the coverages they really need. As he noted, “Letting people know what they need is the essence of our profession!”

I received a solicitation email from another friend now working for an IT brokerage selling insurance. It was just a general email. It said, “We got a customer a GL policy quoted and bound in 20 minutes.” It is physically impossible to determine what coverages a client needs in 20 minutes and if all you are selling is a GL policy, you have failed to determine what coverages a client needs because a GL policy is inadequate coverage about 99.9% of the time.

So, is the industry a profession? Selling inadequate coverage and doing so quickly does not require specialized knowledge. It does not require any academic training, much less long and intensive preparation. It does not require a principal calling. It does not really require any formal qualification. In fact, I am not sure states should even bother licensing BOTS but should require BOTS to identify that the insurance is being sold by a non-professional. The states could make up the revenue loss by charging a special BOT fee.

Truly professional agents need to and must work with their associations and in particular, their carriers in some cases, to distinguish the difference between selling insurance that is almost certainly inadequate and professionally evaluating the coverages people need and then offering solutions to those exposures.

Another article I recently wrote regarding the need for agents to read the policies they sell received firm responses from professionals stating that selling unread policies is completely wrong. One must know the policy they are selling if they are to sell the coverages clients need versus simply selling clients a policy.

The problem with insurance is how it is priced. Everyone gets the same price regardless of whether the agent is incompetent. When the NAIC first formed, it could not have anticipated automated quoting. For fairness, everyone should get the same price. Now, however, the difference between the quality of selling inadequate coverage quickly and selling competent, correct coverage is so large that the aggressive purveyors are taking advantage of these rules so that customers are actually being taken advantage of by these rules.

I like what Progressive has done by filing different rates and different commission rates so that consumers can see the value (or lack of value) of agents earning their commission. More carriers should consider following this approach. I know some agents hate it and they hate it because it exposes the fact that they don’t really bring any value to the consumer and this commission/price ladder forces them to expose themselves as amateurs. Really good agents dislike this system for the opposite reason: they get tired of explaining why they are worth the extra commission!

As a result of the NAIC rules, professional agents are not paid enough through commissions and inadequate agents are always overpaid. Carriers are struggling to cut expenses and are overpaying incompetent agents by at least five full percentage points. There is the savings.

Truly professional agents are underpaid by probably two to five percentage points and because fewer competent agents exist than incompetent agents (as defined by not knowing the policies they are selling and not taking the time to learn what coverages their clients need), the net savings will likely be about two full percentage points. For those who don’t know carrier financials, two full points may be the difference between success and going out of business (not insolvency but selling after a long slow demise).

Otherwise, professional agents need to charge fees (carriers should still cut the commissions of incompetent agents because they are overpaying them). Keep in mind, I am not just throwing bombs. My perspective is based on interviewing and reviewing the results of thousands of producers including reviewing their practices per E&O audits. In other words, my perspective is real world.

Professionals and amateurs are paid very differently in almost all industries. Why pay a BOT or an agent selling inadequate coverage very quickly the same as a true professional who truly takes care of a client?

I don’t think the industry can be classified as a “profession” given the large proliferation of sellers of insurance focused only on the sale rather than the care of the client. We may have professional level players within an amateur industry, but we do not have a professional industry.

To fix it, assuming anyone wants to fix it, insurance commissioners could create a true professional license. I once proposed a fix to a former insurance commissioner and he advised that if I went public with my recommendation, insurance commissioners would come for my head because they did not want the public to realize how little an insurance license really meant. Also, per a Michigan judge who ruled something to the effect in an E&O case that agents can’t be considered professionals given how few hours are required to obtain a license versus the hours required by a person wanting to do nail care.

State agent associations could lobby for differential licensing. That might happen but is unlikely. Carriers could follow Progressive’s lead, and some will.

Otherwise, truly professional agents need to create a boutique advisor service for a fee. The standard of care will be high, but lucrative. A professional must elevate themselves because everyone else is motivated to minimize the difference between the professionals who have dedicated themselves to helping clients obtain the coverage they really need and those who are just selling insurance.