Being an Insurance Agent is really at least three jobs. The first job is a sales position where you sit with people and help them decide what insurance they need. The second job is a marketing job to find those people who will sit across the table from you. And the third job is running a business, even if you are not running the agency.
So, the truth about being an insurance agent is that it is not for everyone. Some people get one or even two parts of the job, okay, but you will have trouble if you can’t manage all three. But there are many common misconceptions and misunderstandings about selling insurance. Let’s set the record straight, once and for all, to make sure you can make a decision about your future career based on solid facts.
Is being an insurance agent worth it?
Let’s assume you’re ready to work hard learning the industry because that’s a good place to start. But hard work isn’t enough. Not many industries outside of financial services offer comparatively inexperienced professionals the opportunity to make a significant income, often within a year of starting out. Even in financial services, few careers can offer you as a newcomer the potential to earn as much right away as becoming a life insurance agent. Actually, hard-working insurance agents regularly earn over $100,000 in their first year.
Life insurance agents enjoy a lucrative career, but it does involve a constant hustle, networking, and sales in evenings and on weekends and general hard work. And there can be a lot of rejection before each sale. Rejection is standard in every sales career, but insurance sales set you up for significant rejection. If you have the ability to become objective, not take the rejection personally, and keep coming back for more, you’ll do just fine!
Many agents start out with a small salary but are mainly dependent on their commissions from their sales to make a living.
Marketing or networking to find potential customers can be expensive or time-consuming. Then getting prospects to purchase is another process entirely. Referring back to the three parts of the job, each agent finds some parts more manageable than others. You may love to network but find it challenging to close sales. Another agent may hate networking so much that they rely almost exclusively on marketing over the internet to find prospects. And another agent might hire an office manager (or their partner) to manage all the paperwork.
Is Sales Experience Required?
A strong background in sales helps no matter the industry. It’s best with consumer sales, but if you have experience selling to companies, that is better than nothing. Once you are hired by the agency, you still have to take a class of 25 to 50 hours and then pass the state-administered licensing examination.
So, success in the insurance industry comes with some sacrifice. It’s a tough job, and many people who “try” (as opposed to “commit to”) the job out tend to burn out sooner or later. You’ll hear “no” more often than you hear “yes,” so you need a thick skin. Many successful agents joke that nothing thickens skin like making lots of money!
Some people consider insurance agents with pretty low regard, and some even call them con-artists. But consider the rejection objectively. And do not take it personally (even if they use your name.) If you can do that, the paycheck and flexible lifestyle are well worth the effort.
Is being an insurance agent stressful?
Well, that depends on what causes you stress. CareerCast ranked being an insurance agent 155th out of 200 on the worst jobs list. They rank the stress as “average,” whatever that means. A good income makes up for a lot of stress for many people, so that helps.
But if you find one of the three basic aspects of the job incredibly stressful, being an insurance agent gives you the flexibility to delegate those aspects of the job, except for the actual sales part. You have to do that yourself. And you will find you need to do at least some networking, so if that causes you stress, rank “average” a little higher for you.
The days spent sitting at your desk and cold calling by telephone to thousands of people, straight out of the phone book, are over. That likely removes most of the perceived stress in the industry. With SEO internet marketing, websites, Google Ads, Social Media, and all the other ways the internet has to bring people to you, you are off the hook for making cold calls.
That doesn’t mean you won’t be making warm calls. Once a prospect contacts you initially, you may be able to use email marketing to get them to set appointments with you. This automated process is even more straightforward now that in-person appointments are not always expected. You can set up virtual appointments through a calendar system quickly, easily and cheaply.
Is it true that insurance agents make a lot of money?
Do lawyers make a lot of money? Well, yes, some of them do. But some of them don’t. It’s similar to insurance agents. The US Bureau of Labor Statistics reports that an insurance agent made $50,940 per year on average in 2019. The lowest 10% in the industry earned more like $28,000, and the highest 10% earned over $125,000.
The way you earn your income differs depending on which company you work for and what kind of insurance you sell. You can work on a salary, salary plus commission, salary plus bonuses, or straight commission. Commissions are the variables. But being an insurance agent pays better agents more – period.
What Determines an Insurance Agent’s Pay?
So, probably very few agents earn in that $50,000 range. Like other sales jobs, they get better and have higher earnings as time goes on and gain more experience. Although you may have a $50k year, chances are you are on your way to a $75k year next year.
Here are factors that can determine how much an insurance agent makes.
Kind of Agent
Your pay potential varies depending on if you work as a captive agent or an independent agent.
As a captive agent, you exclusively are tied to one company’s products. That single insurance company employs you.
- The company takes on the responsibility of generating leads for you, although you can create your own, too. You get set up in a formal office environment with other agents, but some companies are now offering the option to work from your home office. However, you are limited to offering your clients policies only from that one insurance company. That could make it more difficult to close some sales.
- You’ll receive a base salary. Sometimes the salary is preset, and other companies allow you to negotiate. Check before you just accept their first offer! Commissions may be supplemented by quarterly bonuses that add to annual earnings.
As an independent agent, you have your own company. You sell policies from multiple insurance carriers.
- You do all your own marketing, work wherever you want, and you present the solution you feel is best for each client, no matter which provider offers the policy.
- The more experience you have in the field, the more likely you are to want to be an independent agent. There is more risk, but there is also far more reward.
Kind of Insurance
The kind of insurance you sell determines how much you earn, too.
- Home and auto insurance pays a percentage of the premium and renewals. An ever-expanding book grows your passive earnings.
- Life and health insurance policies give the agent a large percentage of the sale when the customer first signs up. There is ongoing income from policy renewal, but much less. After three years, many policies stop paying commissions on renewals altogether.
Why do insurance agents fail?
The truth is that insurance agents fail for all the same reasons that other people in business fail. As we look back on the three aspects of the business, sales, marketing (generating leads) and running the business, it becomes easier to see where the potential failure lies.
Unrealistic Expectations
Probably the most common reason insurance agents fail is that they expected too much too soon. These unrealistic expectations result from a need to be successful quickly. Successful agents have a base of renewals. New agents don’t. It is this lack of renewals that is a significant difference in the income streams. So, a new agent, even who sells a similar amount to an experienced agent, will still earn far less.
Expecting that it takes time to create a book of business big enough to support you is likely the most important element to succeed. After that, we can look at the three aspects of the business.
Sales
You’ll need to do lots of hard work to make the number of sales presentations needed to be successful as an insurance agent. And new insurance agents seldom have the same closing rates as more experienced agents. Early on, it may take you twice or even three times the number of visits with a potential client to sign up a policy. That takes time and more work.
Plus, many new agents lack specific sales training. Not industry training. Generic, “how to sell” information. Although your personality may get you in the door, you will need to know how to present benefits, answer objections and ask closing questions in order to get new customers. Read books. Take courses. Consider this a major priority.
Generating Leads
To be successful, someone has to generate leads for you. As a captive agent, most of the work is done for you by your organization. But don’t leave everything to them! Ask for referrals. Network. Find your own leads, too. Leads you find yourself are more likely to close.
As an independent agent, internet marketing can get expensive. Don’t let up. Insurance is a competitive industry, and you won’t get immediate, overwhelming results. SEO marketing is like networking. You have to be in both for the long haul.
Running the Business
If you don’t return calls, can’t manage your paperwork or forget to pay the lease, you’ll find failure is right around the corner. If these are not your strengths, consider remaining a captive agent or hiring an exceptional office manager to stay on top of this for you. Your business depends on it.
Focusing on Your Commissions Instead of Customer Needs
The whole basis of being a successful agent is to have positive, ongoing relationships with customers. If you are too focused on your commissions or quotas, your customers can see right through you. Chances are you’ll offer policies that don’t cover what they need and end up selling nothing.
It is far more effective to offer real solutions to your customers’ needs and accept the commissions as rewards for having done a good job. Commissions are important but remember it is renewals that are more important. Outstanding service is the secret ingredient for success as an insurance agent.
What are the benefits of being an insurance agent?
Ask 100 insurance agents what the benefits are, and you’ll get 100 answers – or more, quite likely. At the very core, the most successful agents truly love insurance. The idea of creating security for people when they could need it most is ultimately incredibly satisfying.
Consumers don’t know about all of the different insurance policies, so many agents feel responsible for informing people about their options. As unfortunate as it is when something goes wrong in a customer’s life, it can be exceptionally rewarding to inform someone they are covered.
Many agents love dealing with a constant stream of new people every day. They enjoy discovering their insurance needs and the process of arranging insurance programs to meet those needs. Arranging the partnership between customers and providers is something many agents really enjoy.
The insurance industry is a constant learning experience. Things continuously change, and the most successful agents love to learn. They learn about insurance-related subjects directly, but they also learn about sales, marketing and running a business. The details of new policies becoming available may sound dull to others, but insurance agents love to learn about that, too! As they learn about the new policies, they imagine how customers can benefit and how they will explain the new offerings.
Is it better to work as a captive or an independent insurance agent?
This is a critical choice each insurance agent needs to make for themselves. While there is more security as a captive agent, there is more opportunity as an independent agent.
- A captive agent works for one company, selling only that company’s policies. An independent agent works for themselves, representing many insurance carriers.
- A captive agent is provided leads through the company they represent, although they are free to find some themselves. An independent agent must find their own leads through internet marketing, networking, or asking for referrals.
- A captive agent receives a salary plus commissions and/or bonuses and employee benefits, such as medical insurance. An independent agent receives only the commissions on the policies sold or renewed.
- A captive agent has access to administration help, other agents, and a manager/mentor. An independent agent must hire help if needed.
- A captive agent may be required to sell specific policies and meet sales quotas, setting up a conflict of interest. Independent agents can offer whatever product they feel is right for the customer, with no one looking over their shoulder.
- A captive agent can focus their knowledge on the company’s offerings, offering a more in-depth understanding for customers. An independent agent may not have studied the specific policy as deeply.
Captive agents frequently offer exceptional service levels because their salary gives them the freedom to focus on relationship building. Being an independent agent means starting a business, in addition to finding insurance companies to represent.
Should you start off as a producer and then transition to an insurance agent?
Many agents start a career as a captive agent. Some are happy to remain. Others end up feeling frustrated by an inability to create an insurance portfolio to provide customers exactly what they need. Knowing that cheaper options and policies that could align better with customer priorities exist somewhere else make some agents feel like their hands are tied. There is a reason it is called a “captive” agent, and for some, it feels like being in captivity.
The core of the insurance industry is built on helping people improve their finances and manage risk. So, for many agents, making the transition to becoming an independent agent often makes the most sense. Offering customers precisely what they need and never worrying about what the company you work for wants from you gives many the freedom they want.
Independent agents can offer their customers many options at different price points, so they can choose what is best themselves. And ultimately, an independent agent knows that whatever the customer chooses, it means a comfortable living. Many former captive insurance agents encourage others to take back their freedom when they become an independent insurance agent.
Is it smarter to start an insurance agency from scratch or buying an existing agency?
When you think of starting an insurance agency, you might have thought about starting from scratch. But there are some distinct disadvantages to beginning that way.
- Building a customer base
- Creating a marketing plan
- Hiring employees
- Establishing initial cash flow
And you have to do that all without a reputation or track record to start you off.
Purchasing an insurance agency poses unique risks not applicable to other industries. There are many important diligence and regulatory issues to consider if you think about purchasing an insurance agency.
For those concerned about difficulties involved in starting from the ground up, buying an existing agency may be a better fit. You take over the operation currently generating cash flow, with an established customer renewal base and a reputation. Plus, you can choose to hire any current employees already familiar with the business.
A few jurisdictions expect to be notified of any insurance agency acquisition. Texas requires notification pre-closing and will exercise approval authority or allow the approval “deemed” with no notice of disapproval. Even indirect control changes in insurance agencies can be subjected to regulatory requirements, especially if the agency is licensed to operate in every state. Any change in the director or officers usually requires specific enhanced regulatory disclosure.
Therefore, as you decide if you will take over an existing agency or start your own, know that there is work involved in both. There is no easy road to the freedom and flexibility of being an independent agent.
How do you stand out as an insurance agent with so many competitors?
Competition is fierce. So, how do you set yourself apart?
Let’s go back to the basic three elements of the business. Sales, generating leads and running the business.
Stand Out with Your Sales Presentations
To stand out with your sales presentations, start by focusing on your customers’ needs. Don’t sit at the table with your pitch deck and just list all the available products to show how much you know. Let them know that you want to make sure they can choose from the best possible options, so you need to learn about them. And then, ask them about themselves!
Stay relevant to their insurance needs, but feel free to reach slightly beyond to engage the relationship. And listen. Present ONLY what they need to know based on what they told you. Come back another time if you must, but don’t throw everything at them and expect them to pick. You’re the expert!
Generating Leads
Network! Spend time with people. Not just time designed to get leads, either. Volunteer. Live in the community. Let people see you.
Ask for referrals. Be nice about it but ask. Ask for referrals on your email signature. Ask after every sale. Even ask after you are rejected. Every. Single. Time.
Spend the time, energy and money that is required to create a web presence. Get a website. Hire an SEO team. Use Social Media. Your potential customers are on the internet. Go find them!
Running the Business
Offer superior customer service in your office. Answer the phones immediately. Respond to emails promptly. Get your paperwork right. Offer value-added services.
Is the market saturated with insurance agents?
Let’s look at the situation from the other side.
- The latest available data tells us that about 13% of US drivers do not have vehicle insurance coverage, and that number is as high as 20% in 5 states. These rates are rising.
- The census stats report that in 2018, 5 million Americans had no health insurance, and that rate is rising.
- In 2020, only 54% (down from 59% in 2019) of Americans owned any life insurance. In 2019, 37% of these policyholders said their life insurance was designed to replace income, but 30 % said the policies were designed only to cover final or burial expenses. Half of those people with any life insurance are considered underinsured. Usually, the reason is they only have group life insurance through an employer, which is usually not sufficient.
So, if the market is saturated with insurance agents, how are Americans so drastically uninsured? Perhaps it is the economy, or the government or even the individuals who should be blamed. But there is still massive potential!
How to be successful as an insurance agent
Insurance agents enjoy a rewarding career with almost unlimited earning potentials. To be successful, you need specific skills throughout your career. Focus on the three elements of success – sales, generating leads and running your business. Create a balance with these three areas in mind, and you will become successful. And if you have an area of weakness, take some training, or delegate it to someone who will happily complete it for you!
Conclusion
Being an insurance agent is like olives. Some people love them. Some people hate them. But very few people are ambivalent. An insurance agent who thrives selling insurance, as a captive agent or as an independent agent, will tell you their truth as “there is no better career!” Someone who decides to try out being an agent for a while to see if they like it may tell a different story. They may have a list of complaints that make it hard to imagine that anyone would choose such a job, even if the pay is good.
If you have a strong work ethic, superior sales skills, a willingness to generate leads (especially through networking), you could be in it for the long haul. The freedom and flexibility to attend family events and meet a constant stream of new people could feed you. But it may be time to learn more about internet marketing since that is the future of lead generation in most industries, but especially for insurance.
Perhaps the truth may be that you are already an insurance agent, even if you don’t work as one yet!
