The company with the largest life insurance sales force in the U.S. says the licensing test for insurance agents is too tough so it is asking state regulators to ease the test.

The problem for Primerica Inc. is that of the 230,000 people it recruited last year, just 20% become agents, with the remainder mostly failing their state’s licensing exam, according to a Wall Street Journal article.

The insurer said some state tests are too hard, and others might be racially biased, meaning African-Americans and others have a harder time passing, according to the article.

Among Primerica’s recruiting requirements are that individuals be free of a criminal record and that they pay $99 for licensing and training costs.

Since 2006, more than 900,000 people were recruited by the insurer, which, according to the article, is 43 times more than are recruited by New York Life Insurance Co., one of the largest insurers in the U.S.

A California Insurance Department representative told the Wall Street Journal that Primerica recruits’ failure rates lowered the overall pass rate in the state from 73% to 58%, between April 2010 and September 2010.

In Virginia, Primerica’s 825 recruits had a 38% pass rate between June 2008 and June 2010, while other training programs’ test takers had pass rates of between 51% and 83%, a representative of the Virginia State Corporation Commission Bureau of Insurance told the newspaper.

 

 

31 Responses

1. Ken Godfrey Says:
   April 26th, 2011 at 12:21 pm

   What a terrible idea. Leave it to Primerica to come up with this plan.

   Life insurance is a very complicated financial product and agents should have a minimum level of expertise and product understanding. I applaud the fact that these tests weed out those unfit for the industry. If a recruit isn’t committed to studying and preparing sufficiently to pass the licensing exam, how can one expect them to be committed to the life insurance industry that already has very low agent success rates?

   Maybe Primerica should provide better education and test preparation courses for their prospective agents.

2. Derek Bagley Says:
   April 26th, 2011 at 4:39 pm

   The thing with Primerica is they only do Term Life Insurance, yet their agents have to test on both Term and Cash Value.

   The problem is with the Cash Value part of the tests. Understanding Cash Value is difficult. It seems like it was designed that way so the average consumer couldn’t understand what they were getting into.

   I think Primerica’s goal is to make it possible for their agents to not have to take the Cash Value Part of the Exams.

   Primerica has never sold and never will sell Cash Value.

3. Chris Says:
   April 26th, 2011 at 4:59 pm

   Agreed, Ken. Lowering the standards is a bad idea. How about Primerica raise their recruiting standards? Just a thought.

4. Marcia Pierce Says:
   April 26th, 2011 at 7:11 pm

   No way should the testing for insurance producers be dummied down. The insurance products are complex and the consumers need the guidance of a well educated and appropriately licensed producer. If they can’t pass the test they should not be advising others on the purchase of an insurance product.

5. Robert Mickson Says:
   April 26th, 2011 at 7:49 pm

   Before you judge, do your research. Much of the test is on products they don’t sell, AND why should we be tested on products that we will NEVER sell? That’s like putting a lawyer through the Barr Exam, and having 1/3 of the exam on how to fix a car! Along with that, EACH STATE HAS EXTREMELY DIFFERENT STANDARDS ON TESTS.They aren’t the same. For example, if I took the test in MA, and did it in NV, I could pass the MA Test with Flying Colors, however fail the test in NV miserably.

6. Garland Hamlett Says:
   April 26th, 2011 at 11:12 pm

   Ken:
   You are right on target. The exam in VA requires one to study and be prepared when you arrive at the exam site. Fialure to adhere to prepare will result in exam failure.

7. Charles Daniels Says:
   April 27th, 2011 at 10:36 am

   Being a Primerica rep I enjoyed this article. The State of Virginia says you must be 18 years old, have no felonies and pass an exam. Some states don’t even require an exam to initially sell insurance. The exams have been proven to be arbitrary!
   We distribute financial services to the very people that the rest of the industry ignores or, worse, tries to dazzle with double talk in order to make a sale.
   “There has never been a test designed to tell what is in the heart of a man or a woman.” Art L. Williams

8. Julie Mack Says:
   April 27th, 2011 at 6:53 pm

   Most insurance and financial planners make this a career, not a weekend project. Considering the importance and consequences of our actions and advice with clients (financial solvency at all points along the age time line and weathering the impact of morbidity and mortality), insurance education requirements should be strengthened rather than weakened. How does Primerica expect their agents to sell securities products if they can’t get life insurance right? For a company to promote this idea, is tragic. Then again, you can’t purchase a product that lasts much beyond the age of 70 with Primerica. Due diligence? I think not. New York Life, and other companies like them, get it. Education and more education is best for the clients we serve.

9. Art P Says:
   April 28th, 2011 at 8:55 am

   Very bad idea. Primerica sells one concept as the answer for every client’s needs. That’s not sound financial advice. In order for the public to be best served, they need agents who are knowledgeable enough to know that sometimes term isn’t the best answer.

   Most of the Primerica agents I have encountered do this part-time for a few months. They sell a handful of policies, then end up leaving the business….and leaving the clients, too. We need to raise the bar when it comes to this profession, not lower it. That is in the public’s best interest. Insurers already take enough of a beating in the public arena. Why would we want to do something to allow less capable people into our industry.

10. LJ Gross Says:
    April 28th, 2011 at 11:22 am

    To obtain a life insurance license license you should pass a test that covers your knowledge of all types of life insurance, even if you plan on selling only one type. How can you sit in front of a client and compare an existing whole life policy with a term policy if you do not understand it.

11. Life Insurance Animal Says:
    April 28th, 2011 at 5:36 pm

    The life insurance industry has a problem:
    1. Not enough new agents coming in to reduce the aging agent population.
    2. A decline in sales.

    That being said, reducing the test standards is not the solution. If you are not capable of passing the test, you shouldn’t be selling it. Understanding a life insurance contract is much more complicated than most people realize. Most financial planners couldn’t tell you the internal components of a whole life or univeral life contract, much less someone who can’t even pass the state licensing test.

12. Richard Jarris Says:
    April 29th, 2011 at 12:25 pm

    knowledge is a dangerous thing! People with knowledge actually think. This is obviously quite dangerous to Primerica.

13. Warren Says:
    April 29th, 2011 at 2:32 pm

    Right, many states DO have different testing requirements. These are based on their experiences with Flim-Flam agents promising the moon and delivering heartaches. If the insurance companies want standardization – perhaps we should all have to comply with New York and California insurance licensing and business practices.

    I attended a Primerica recruiting meeting, after being licensed and actively selling insurance for a few years. I loved the prospect fact finding demonstration. However, when I questioned how and why some of the prospect’s existing assests were being replaced or encumbered – I was told that, “Primerica isn’t for everyone.” The implication being that I examined the situation too closely. I have, however, been invited back many times – I’ll talk with them, I just haven’t gone back again.

    Seriously, if they are selling, recommending, or recommending the replacement of securities products – don’t they need a securities license?
    If they are selling, recommending, or recommending replacement of insurance products – shouldn’t they have thorough knowledge of the subject and products? As demonstrated by having an insurance license?

    When I was licensed, the classes cost about $300, and the exams cost another $50 to $100 for an insurance agent license. $99 is a steal.

    What Primerica may be attempting is to have non-agents selling. I am seeing more companies doing this. They are classified differently, don’t have the full requirements, don’t have the skills, and basically man a phone and fill out the application. Most Auto insurance offices do this. We all see advertisements on TV all of the time for people to get their auto insurance online. Many of you reading this understand why this is such a terrible idea. I’m sure many of you don’t know that even auto insurance is more complicated than just choosing a price. For example – do you know that most people insure the other person in an accident more than they insure their own family in the case where they wreck with an uninsured or underinsured person? You think the other person is worth $100K or $250K or more, yet your own families health is only worth $10K? Did your “Agent?” tell you that?
    There are many life and health insurance companies that have a telephone number for people to call to buy insurance. In many cases they are manned by a non-agent (some in India), supervised by an “Agent?”. Many companies are selling through the mail. As an agent, I am constantly in competition for my clients with the insurance companies. I make the sale; the insurance company sends out applications for other products or sister companies.
    For a long time, I have known that most insurance companies want a constant churning of agents. They sell a few policies, then get discouranged and quit. Then the company doesn’t have to pay any more commissions. Sweet! For the company. Not so much for the new agent. Nor, the policyholder – situations change – now where’s she going to go?

    Look, the regulations have gone to next to nothing for investing in the stock market. It’s little more than an organized gambling system with a few people “putting the fix in.” Seriously, most people aren’t investing in a company – they are seeing if they can “buy low and sell high” better than some other poor schmuck. Or they are betting against inflation.
    The same thing is happening with real estate. People are losing their… well, you can finish that sentance.

    Relaxing the testing is not the answer. Typically, a high percentage of first time testers don’t pass, anyway. It’s a complicated subject. Such as at what point should a person self insure their health? How much Life Insurance does a person really need to maintain a families standard of living should something happen to the breadwinner … or homemaker … who will take care of the children if something happens to the parents …. how much will they need … does it include remodeling their house to accomodate the additional people … how long will grandma live … and where will she really live if she gets senile … how much will that cost … will it affect the rest of the families assets … how will social security benefits affect this?
    These are just a few of the questions I have to deal with on a daily basis, as an agent. Any one out there that has been an agent for a while, and is really an agent instead of someone just trying to make a sale at any cost, knows this is a complicated subject. I am appalled and insulted that a bean counter somewhere would attempt to trivialize the subject because too many of their recruits aren’t trained well enough to pass the basic insurance agent exams with no effort. To want to have their folks, without enough understanding of the subject, make recommendations on a subject they don’t marginally understand – that can affect a families financial future – it’s criminal negligence!

    I’m sure they will succeed, as many other unwise insurance products are on the market due to lobbying. So sad. I don’t have the assets to fight them, and word of mouth isn’t working very well. When everyone’s money is stolen by the few – then what?

14. Julie Mack Says:
    April 29th, 2011 at 3:24 pm

    I doubt that we will get any other viewpoint on this issue, except for more stringent education. The reason? I doubt whether any part time Primerica agent has read much less even knows about a professional website like IFA webnews!

15. Michael Maughan, Ph.D. Says:
    April 29th, 2011 at 3:56 pm

    As a Ph.D. in Industrial/Organizational Psychology I’m required to ensure tests are valid, that is they predict what they are supposed to (e.g., ability to do the job; knowledge), and they are relevant, related to bona fide occupational qualifications. As a State, California, must ensure their constituents are not taken advantage of (through lack of knowledge) by those who sell them something inappropriate. As an employer, most life insurance companies use valid and relevant selection processes. Take a look at LIMRA, who, among other things, produces valid and relevant selection tests for the life insurance industry.

    If all that is needed for this large number of agents to be hired (retained?) “…are that individuals be free of a criminal record and that they pay $99 for licensing and training costs.” then the business model is one that depends on large recruitment with, apparently, little valid pre-screening. Such a model ensures people with a wide range of abilities enter the company and, without additional screening and licensing, would qualify to sell life products to the public regardless of their knowledge. Given that States such as California have a responsibility to their constituents a licensing test is more important, more necessary for a life sales population that has not been screened in any other job related and valid way. Even with licensing exams, the knowledge, abilities, and personalities of some agents is such that the public could still be at risk, however, such exams make this outcome less likely. Getting rid of licensing exams does not serve the life insurance industry or the public.

    Insofar as selling one product (Term Life) is concerned, that can change if the company believes it is in its best interest, and the interest of its stockholders/stakeholders to make such a change. It might even be necessary in the exercise of its fiduciary responsibility since the leadership could be held liable if they did not run the company in such a way as to ensure its continued viability.

16. DM Says:
    April 29th, 2011 at 4:22 pm

    I have a unique perspective on the issue. I have been in the industry nearly 20 years. I also taught pre-licensing education for TX as well as Series 6 & 63. The proper concern is whether the examinations for entry reflect the job requirements. This is namely relevant for the middle market that few agent based insurers target.

    Over time, mainly during the late 70′s and into the 80′s, the insurance licensing exams and process dramatically increased in difficulty. As with all such requirements, the objective was NOT to accurately reflect the required knowledge and skills required to perform the job. The objective was to limit participation in the industry! Congratulations, the plan succeeded beyond the wildest dreams of the lobbyists! As the median age for insurance age approaches social security early benefit age some are beginning to fret. How will these agents be replaced, and why are there few agents serving middle income clients especially those in minority communities?

    If one desires to roll back some of the onerous requirements that do nothing to protect consumers from incompetent agents, how does that occur? Everyone, that has been in the industry more than 6 months knows that success or failure is not predicated on insurance knowledge. True success or failure is based upon your ability to market and sell. Everyone knows of the agent that aced the exam and lasted under a year. We also know the agents that know just enough, but ace the people and sales skills and are at the top of the profession in terms of productivity.

    As stated earlier I taught pre-licensing for a few years and came away with some basic observations. The exams are challenging and test not only one’s knowledge base, but also their ability to take tests. The difficulty level at the time was managed to ensure the average passing score was only a few points above the minimum. The average overall score was in fact below the minimum (this information came from the testing service used at the time). I know several college graduates that sat for the exam at least twice before passing.

    Individually, persons that were successful passing the exam prepared thoroughly. The typical person sitting for the exam has a tough time preparing as do all non-traditional students for any exam. This is especially true of someone starting on a part time basis – primary job, new insurance/ financial job, family obligations, AND exam prep often overwhelms the best of intentions. However, I always counseled students to plan their exam around these issues and allow sufficient prep time. When faced with paying for an exam if you have not had sufficient time to study, many will go ahead and take it instead of skipping the exam and rescheduling. Of course, most of these people fail the exam.

17. Len Says:
    April 29th, 2011 at 9:24 pm

    I cannot imagine that 80% of a qualified group of potential insurance agents would not pass a simple state insurance exam. Any suggestion from Primerica to dumb down our profession should be solidly rejected!

18. C RUSSELL Says:
    May 1st, 2011 at 7:29 pm

    I do not think that the company is responsible for the agent to pass the exam. It is the agent that needs to study and find all of the materials to pass the exam. Today there are enough technology tools and book stores to find help with any exam. Good fortune to you all!

19. DBM Says:
    May 2nd, 2011 at 11:18 am

    PrimeAmerica may not sell cash value like insurance, but its agents will at some point likely work with someone who has cash value insurance or is contemplating purchasing cash value insurance. How can the agent properly serve those people or make the proper recommendation to those people if they themselves do not understand the cash value life product? I for one have no sympathy at all for those who want to sell insurance but are not committed enough to the profession to understand all insurance products, not just the ones they sell.

20. lloyd Humphrey Says:
    May 3rd, 2011 at 2:46 pm

    lowering life testing standard simply to satisfy a single company’s recruiting and hiring standards seems to be a very bad idea especially when the products can be more complicated. it seems odd that other life companies haven’t made such a request recently or in the past. Maybe Primerica is approaching their hiring with the worng agenda,perhaps their real concern is only for their company and not for the consumer they are supposedly serving. I’m in favor of higher testing requirments and not lower ones.

21. Deb Says:
    May 3rd, 2011 at 7:21 pm

    What I’d like to know is why do life insurance agents have to pass all these tests & get licenced but people who work for the bank selling life insurance don’t have to have any licences at all!!?? Why? Because the banks and the governments are in kahoots!! The rules are different because they don’t want agents stealing the bank’s clients so they make it tougher for us to get into the industry. Primerica’s main problem is that they brainwash their agents into thinking cash value life insurance is the devil’s spawn so they have a mental block when it comes to learning about it. Perhaps if they taught their agents to be open minded and willing to learn about all options out there, they would have better results. Even AL Williams would love Universal Life if he really understood it – it’s the purest form of buying term & investing the difference!!

22. Ken Godfrey Says:
    May 4th, 2011 at 9:57 am

    Deb – you are sadly mistaken. The banks and governments may be in kahoots, but not when it comes to life insurance licensing. Bank employees who sell life insurance must be licensed as well.

23. RM Says:
    May 10th, 2011 at 6:15 pm

    Why on earth would we accept ‘agents’ into our industry with an eaiser entrance exam! Primerica needs to stop bringing ‘part-time’ agents that are looking for additonal income to their household into this business. We as an industry have to have some standard that needs to be met and are already suffering to get younger talent to keep the industry strong. Now is not the time to lower the standard because their recruiting tactics dont work. Maybe we should all recommend to Primerica a way to take their ‘Amway’ business and go find something else to market to people. In fact, Primerica needs to wake up and learn its 2011, not 1985!

    I am not in this business because I want side income. I am here because I am here to serve the small business and individual market the right way, with sound planning. Not TERM and invest the difference! Way to go Primerica, you have once again proven that your company is less than classy and is looking for an easy way to make our lives that much harder with your ‘ease’ tactics.

24. Mitch Says:
    May 16th, 2011 at 11:25 am

    Robert Micksons comment about the tests being difficult in different states is moronic. I passed 4 different state tests and I am by my own admission, a horrible test taker. If you cannot pass the group 1 test, you didn’t study and or you are an idiot. It is the easiest test ever.

25. John Still Says:
    May 24th, 2011 at 6:53 am

    Primerca should be ashamed. They try to hire part-timers..don’t properly train nor educate them…and denigrate the life & health insurance professionals who know their business. If anything, they the regulators should assess why they have such a high failure rate…not dumb down the entry exams!

26. Licensed agent in Missouri Says:
    August 20th, 2011 at 5:53 am

    If it is true that Primerica is pressuring states to make their life insurance license exams easier, it is (or at least should be) an embarrassment to Primerica, as it brings dishonor to them and takes away prestige from a company, which was founded on principles of honesty and integrity. To play the race card on this issue is not only dishonest; it is utterly absurd. I don’t understand how the tests could be more difficult for African Americans and other minorities. Anyone who studies the subject in depth for at least 20-30 hrs should be able to pass the test in any state. This is of course just one man’s opinion.

27. Licensed agent in Missouri Says:
    August 20th, 2011 at 6:15 am

    Being someone who is familiar with Primerica and their operations, I would say that the problem of many of their recruits not passing the state licensing exams has more to do with the individual test takers than it does the tests, or the organization’s ability to properly educate and train their agents. Most (if not all) Primerica offices offer free classes and study materials, including online study guides and exam simulators to help prepare recruits for the insurance licensing exam in their state. The fact that many people fail these exams is only a reflection of the individual’s abilities, and suggests that they should’ve studied harder and applied themselves. I can’t say I know how hard the exams are in other states, but in Missouri it is not very difficult if you have a good understanding of the subject, and can remember some basic state laws concerning insurance, and apply some common sense when answering the questions.

28. Heather Says:
    December 23rd, 2011 at 6:07 pm

    Well I’ll be glad if the test is not easier. It shouldn’t be. As for Primerica, (being a rep myself) we have a problem with these random little pockets of nasty offices with shady recruiting tactics that defile our name. A great thing about working with Primerica is that you’re contracted. That means you get a lot of freedom to try unique ideas to network yourself out there, you get to decide how to run your business. Unfortunately, that freedom means that some shady people get involved too. I love Primerica, but I think their biggest downfall is that it is too easy to get involved in the company. Anyone with a clean record (but careless/nasty intentions) and who can pay for the background check can get involved. Primerica has great products, and a smart rep with a good moral code can give the right products to the right client. I know reps who are so fonfident with the business, that if they see a client’s current policy is better, they tell them to keep it (however this is very rare, Primerica pretty much has the best policies around in terms of value). Its these jerks who barely pass the tests and only care about making a quick buck that need to get the heck out of my business. It makes me mad. Making Primerica a full time job is HARD work. Building a legit and stable organization as a RVP takes TIME and ENERGY and INTEGRITY. So please. Don’t make the tests easier. With a 60% pass rate here in California we have enough losers parading around our name as it is.

29. Robert Says:
    January 31st, 2012 at 11:45 pm

    Funny, I’m doing a little more research after a Primerica agent and my New York life agent just left my house. When the Primerica agent explained my VUL policy I did not believe him at all. I had my New York life agent and the Primerica agent sit down together and explain everything to me and it was completely embarrassing and totally obvious that my New York life agent with 20 years of experience had no answers for the Primerica agent with six months of experience. The Primerica agent just asked him to explain what should be very simple things in his own company’s policy and he wouldn’t give a straight answer. I’m not a Primerica agent and I personally don’t care about the testing but I’ll tell you this, I was very impress that somebody with six months experience completely destroyed a 20 year veteran. My VUL cost me 485 a month & the primerica agent offered me a 35 year term for the same face amount for 128 A month. You can see why I was skeptical, it sounded too good to be true. The great separator was that the Primerica agent keep refering to the life insurance policy when my New York Life agent wanted to just make stuff up off the top of his head and hated when the Primerica agent referred to the policy. My New York life agent was at a loss of words when the Primerica agent asked him to explain why I have what’s called an option A in the policy. It states that if I die my family only gets the insurance not the savings portion of my policy, AMAZING! For me, that’s a little shady when people are selling things that they don’t want to explain. I haven’t done business with Primerica yet, but the more research I do, the more I realize they are actually telling the truth. What really convinced me is I googled Suzie Orman and Dave Ramsey on cash value and that pretty much locked it up for me. Funny thing is they are consumerist and people argue against them, I guess that’s expected from shady life insurance agents who sell products that they don’t agree with. If you’re looking for insurance, do the research don’t take any company for face value. When I set aside all the BS and really look at the products that are being offered, Primerica seems to be right, but I’m no expert

30. Melton Says:
    February 19th, 2012 at 10:44 pm

    I’m a 23 yr old young man who just graduated from Triangle Tech with a Assoc. Degree in Electrical Maintenance, and a GPA of 3.79, and that’s only because I suffered severe renal impairment during my second term. This has nothing to do with insurance but I want to make a point that I’m a very bright young man and I studied life insurance for two month everyday during my summer break from school and I failed the state exam. I took notes, made flash cards, studied with others, and failed. Just recently I went for my license and failed again, after studying just as hard as the last time. Now when i took the test again I guess what I failed. I think it has to do with the fact that these test leave out words and alter the situations so that people will fail and have to pay another fee. Certified Insurance Loss Control Inspector <<<<

Pages linking to this article:

• Insurance agent licensing exams should be more difficult, poll finds | Insurance & Financial Advisor I IFAwebnews.com
  

  [...] 50% of poll participants agreed that state licensing tests should be made harder, contradicting a recent suggestion by Primerica that state licensing examinations should be softened.The insurer told the Wall Street Journal that only 20% of the 230,000 people it recruited as agents [...]

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