In a world of converging financial services, it is almost inevitable that salespeople from different industries — insurance and securities, for instance — will compete head-to-head for clients. Who will win, stockbrokers or insurance agents? Bet on the stockbroker. Show
As principals of the CBM Group, a New York-based consulting firm, we have analyzed both insurance agents and registered reps. What we have found over the years is that brokers, on average, tend to be much more productive salespeople than those hawking insurance. Indeed, an insurance producer would have to be in the top 10 percent of the profession to make what the average stockbroker earns. In 2001, average broker compensation was around $182,000 on gross production of $400,000. This number implies a payout rate of about 46 percent. Since gross production tends to be around 1 percent of assets under management (AUM), the average broker had $40 million in AUM. Assuming asset turnover of between 20 percent and 25 percent per year, one can deduce that the average broker sells between $8 million and $10 million worth of “new” product each year. (Clearly there is a wide dispersion of performance behind the averages, but the mean numbers do offer insights, nonetheless.) For life insurance, CBM estimates suggest an average salesperson compensation of $60,000, two-thirds of which correspond to new product sales and one-third to renewals or trailers. CBM's proprietary methodology for calculating “equivalent gross” production for insurance producers suggests an average of around $100,000 per year, or about one-quarter that of an average broker. The average life insurance agent brings in about $1 million worth of premiums and/or assets a year. (As in the brokerage industry, there is a wide range of performance in life insurance sales: the top 10 percent of insurance agents generate about 25 times the production of the bottom 10 percent.) Apples and Oranges?One obvious factor in the production disparity between brokers and insurance salespeople is that securities firms serve a wealthier customer base. A typical wirehouse brokerage client will have investible assets in the mid-six figures, whereas life insurance clients have, on average, around $100,000. However, the securities industry has to work harder for the money, too. Its relatively wealthy clients tend to be more demanding than the average insurance client. As a result, securities firms need more sophisticated salespeople to serve such clients. In addition, brokerage firms also have a more expensive business model than life insurers. A brokerage firm offers considerable support to its producers: a desk or office, technology, sales assistants, research, compliance, complex back office operations, etc. This kind of support is costly: up to $150,000 of fixed and semi-fixed cost for an average producer. By contrast, life insurance companies offer minimal support to their producers, who are typically “attached” to an agency office but most of the time, they go to the client or prospect's location. Brokerage firms need more productive salespeople to offset the higher cost structure, and, as a result, they tend to put much more pressure producers to, well, produce. Exit PoliciesAll brokerage firms have strict “up or out” policies for trainees and experienced producers. The average production of brokers almost always increases with years of service. In life insurance, however, it is quite common to see producers who have been in the business for many years stagnate or even decline in terms of production. Since their cost structure is almost fully variable as a function of production, life insurance companies tolerate part-time and semi-retired producers and offer them the option of working out of their homes. Producer compensation is another major difference between the two industries. Brokers “eat what they hunt.” Most of their compensation is directly tied to fees and transactions — commissions and sales loads. In life insurance, trailers and renewal commissions are substantial, and it is quite possible for an experienced life insurance producer to “slow down” but still make a comfortable living from renewals. That said, when taking stock of the competition from the insurance industry, it would be a mistake for brokers to be dismissive. (If for no other reason than because they are vastly outnumbered, 400,000 to 100,000.) But the fact remains that in a head-to-head competition for a client, a broker is likely to be the fitter foe. There are many vital work positions available within the insurance industry. They include insurance agents, brokers, adjusters, and more. Most people have no idea about the nature of these various job positions and they don’t need to. The only thing customers need from the industry are insurance policies. But, if you’re aiming for a career in the insurance industry, you do need to understand the many careers that are available to you. In this article, we’re going to focus on one in particular: insurance producers. In this blog
What is An Insurance Producer?Insurance producers are professionals in the industry who sell insurance policies. The state licenses them to sell property, commercial, life, health, and various lines of insurance from an insurance company. Producers can specialize in selling one type of insurance or multiple lines. The more lines they sell, the more potential customers producers can accumulate. Depending on their level of skill and experience, they should be able to expand their customer base and earn a decent living. List Your Business For FreeStart getting noticed by thousands of insurance buyers near you. Add Listing
What Does an Insurance Producer Do?Producers are licensed to sell insurance policies. They can work with a single insurance company or multiple carriers. Since they sell policies, one of the prime duties of a producer is to act as a bridge between clients and an insurance company. Some of their other responsibilities include:
Insurance producers are the first point of contact when a customer requires a policy, needs to file a claim, increases their coverage, or needs a policy renewal. Note: Producers also need to nurture and maintain new and old client relationships. Much of this job description sounds similar to an insurance agent or a broker. While the exact differences between an agent, broker, and producer may be subtle, it’s important for beginning insurance professionals to understand them. How Do Insurance Producers Differ from Insurance Brokers?Insurance producers represent insurance providers while insurance brokers represent customers. Brokers primarily search for insurance products that will best suit the needs and interests of their clients.
Are Insurance Producers Similar to Insurance Agents?In terms of job responsibilities, insurance producers and insurance agents are the same. The term “agent” is prevalent among customers, while the word “producer” is used mainly within the insurance industry. Basically, an insurance professional whom a client contacts for purchasing a policy or any insurance-related service is both an insurance producer and an agent. How to Become an Insurance Producer?Many states require insurance producers to pass one or more licensing exams based on state regulations. This ensures that the person selling insurance policies knows what they’re doing. Attempting to simply memorize insurance regulations probably isn’t the best way to learn everything about insurance. Insurance producer applicants usually opt for insurance training courses instead. To become an insurance producer, here are a few steps you need to follow: Have the Minimum Education RequirementsThe insurance industry requires producer or agent applicants to have at least a high school diploma or a GED. Most entry-level insurance producer jobs do not require a bachelor’s degree or higher. However, if you have relevant higher education, you would potentially have a head start. Decide On What Insurance Line You Want to SellYou should figure out which line of insurance you want to sell as an insurance producer. Producers can sell property, commercial, life, health, and various other lines of insurance. You could start by selling a single type of policy if you like, and then move on to selling more as you move forward in your career. But having a definite goal in selling a specific policy can give you the focus you need. Be Familiar with Pre-licensing RequirementsEvery state requires aspiring producers to pass a licensing exam for them to be certified. The requirements tend to vary by state. You can find your state’s licensing requirements through the National Insurance Producer Registry (NIPR). Also, you can enroll in specific courses that help you understand the insurance industry and the responsibilities of a producer. Courses are available from such organizations as AB Training Center, Kaplan Financial, and WebCE, to name a few. These courses are short and can be completed in a few weeks, depending on the amount of time you’re able to put into studying. Take Your Licensing ExamAs you prepare for the licensing exam, it’s best to register and set your exam date. Once you know when you’ll be taking the test, you’ll have a goal to work towards and can prepare accordingly. Make sure you register with your state’s designated exam provider. And double check to make sure you’ve got the right time and location for the exam. You don’t want to miss it after preparing for it. Submit Your Documents to The Insurance BoardOnce you’ve successfully passed the exam and received your results, your next step will be to send your documents to the state insurance board. All states require applicants to submit their official documents for an assessment of the applicant. As per FindLaw, these requirements differ according to the state you are in. But in general, the documents include a state exam certificate, biometrics, a citizen affidavit, and a background report. The state insurance board will review and approve your license based on the documents you submit. Once you’ve acquired your license, you are legally allowed to work as an insurance producer.
Vital Skills for an Insurance ProducerPursuing a career in insurance as a producer or an insurance agent, comes with many opportunities to learn on the job. But there are specific skills and habits you should cultivate beforehand. These include: Taking The InitiativeYou will be responsible for what you do with your time and the opportunities provided to you. While you may learn from an experienced supervisor, you have to put in the effort at the end of the day. You will constantly learn new things and take on additional tasks, so it would be best if you learned how to manage your time effectively. Communication SkillsAs a producer, you will interact with people constantly. You will communicate and relay information with them verbally or through writing. Whether it’s clients or other insurance professionals, you will need to communicate with them efficiently and effectively. With clear communication, you avoid misunderstandings that will only make your job harder than it has to be. Tech-FriendlinessAs with many other fields these days, the insurance industry is dependent on technology. As reported by Statista, the industry invested an estimated $14.5 billion in global insurtech companies in 2020. This means that insurance professionals have to work with relevant technology constantly. As an insurance producer, you need to be well versed or adaptable enough to use electronic devices and computer systems. Since technology is part of your daily bread and butter, having a tech-friendly approach and the willingness to learn is essential for any person wanting to become an insurance producer. Sales ExperienceWhile you will get the chance to learn as you work, having a decent sales background can be helpful. You need to have the right mindset to learn insurance selling strategies. Insurance isn’t one of the easiest products to sell, and often people will reject your efforts. But it’s a learning process. You should be eager to gain more sales experience with every opportunity you get. Strong Will and DeterminationEspecially when you’re first starting out and are still developing your sales skills, you will hear many different versions of the word “no” from clients. You can’t let it discourage you. Treat it as a learning experience and move on. At times, the people you reach out to may be downright rude. Conduct yourself professionally and remain polite no matter what. You need to develop a thick-skinned personality while working as a producer. How Long Is an Insurance Producer’s License Valid?As explained in LawInfo, insurance licenses expire in the last day of the birth month of the licensed individual in the first year the license is issued. Individuals born in even or odd-numbered years renew their licenses on their birthday in the even and odd-numbered years, respectively. Producers will get a notification of their license’s renewal and its instructions 90 days before the expiration date. If you are confused regarding renewal details, don’t hesitate to consult with your local insurance regulatory body. How Much Do Insurance Producers Earn?The vast majority of producers earn from commissions. It’s the most common form of income for experienced agents that work independently or with an insurance company. According to ZipRecruiter, the average annual income of an insurance producer in the U.S. is $39,491. This equals $3,291 per month or $759 per week. Also, the top 90th percentile of producers has an annual income of $61,500 and more. At the same time, the 25th percentile earns around $25,000 annually. Is It Worth Becoming an Insurance ProducerA career in the insurance industry can be both rewarding and exciting. The industry has a growing need for insurance professionals. According to the Bureau of Labor Statistics, insurance jobs are to grow by 5% through 2029. This is good news if you’re looking for a career in the industry. As a producer, you can work with many different lines of insurance. This flexibility brings variety in terms of work and interaction with people. While there are daily tasks of reaching out to new clients and following up with existing ones, the job isn’t as monotonous as it sounds. The requirements to get into this line of work aren’t prohibitive, either. You can quickly start as long as you have a high school diploma or a GED and a willingness to learn. Insurance companies usually provide their employees with flexible working hours, job perks, and diverse work cultures. Such features can be a real plus in your professional and personal life as well. As long as you have the drive to excel in this career, becoming an insurance producer is worth it. What is an Insurance Producer? from MayaFontenot In Conclusion,Insurance producers are one of the essential positions in the insurance industry. They don’t stick to just selling. They have the opportunity to learn more about the industry and grow as capable professionals. Producers also cultivate the relationships they have with clients. This, in turn, helps the company grow. As a producer, you will learn the necessary skills that will help you advance in your career. However, your growth will ultimately depend on your level of ambition. As long as you have the mindset to excel and do better, you will do well as an insurance producer. Think you’re ready to take the next step toward becoming an insurance producer? As a producer, you’ll need to have a good number of leads to help build your business. Our insurance directory will help you generate those leads for free! Check it out and add your listing today! Frequently Asked Questions (FAQs)Is Being an Insurance Producer Stressful?New producers can expect a certain stress level from the job due to the unfamiliar working environment and responsibilities. But as you become more experienced and learn to manage your time, you’ll gradually feel more at ease. How Long Does It Take to Become an Insurance Producer?You can receive your insurance producer license in about 3-4 weeks after completing the licensing exam. But the licensing requirements can change according to the state, so it’s best to check with your local insurance governing body for precise details. What is a producer in the insurance industry?Insurance producers are people who engage in the sale of insurance products. Insurance producers are required to be licensed in the state in which they sell insurance. This may require passing an examination or meeting state-specific educational and/or ethical requirements.
What is a producer agent?A licensed insurance agent, or producer, is someone who sells insurance on behalf of an insurance company.
What is the difference between insurance agents and brokers?Agents represent insurance companies. Brokers represent their clients. Brokers have a fiduciary duty to their clients, which agents do not. This means that agents do not play an advisory role in the process as brokers do.
What is the difference between a broker and an underwriter?A Broker is a person who buys and sells goods or assets for others. An underwriter is a person or company that underwrites an insurance risk.
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