Orlando Harmon
The insurance agent sector is expected to grow in the coming years, despite consumers increasingly buying insurance online. In 2022, there were approximately 927,600 people working in insurance agencies and brokerages in the US, with 382,913 people taking licensing exams for the first time. However, it is a challenging career path, with 30% of new agents leaving in their first 90 days and over 90% quitting within the first year. This article will explore the reasons behind these statistics and discuss the potential rewards and pitfalls of becoming an insurance agent.
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What You'll Learn
- Attrition rates: 30% quit in 90 days, 90% leave in the first year
- Salary: $61,154 for under a year's experience, $79,205 for 10+ years
- Pass rates: 57.9% pass licensing exams, ranging from 28.73% to 81.54%
- Job outlook: 8% growth expected by 2032, 47,100 openings annually
- Commissions: the most common form of compensation, with bonuses for targets
Attrition rates: 30% quit in 90 days, 90% leave in the first year
The insurance sector is a competitive field with a high attrition rate. In the US, the insurance agent and broker industry's revenue grew by 2.7% in 2020, and the sector is projected to grow by 8% in the next 10 years. However, the attrition rate for new insurance agents is notably high, with 30% of new agents leaving within the first 90 days and over 90% quitting the business within the first year.
Several factors can contribute to the high attrition rate in the insurance industry. One significant reason is the demanding nature of the job. Insurance sales agents have a wide range of responsibilities, including contacting potential clients, interviewing clients to understand their financial situation, explaining various insurance policies, analyzing clients' current coverage, and customizing insurance programs to meet individual needs. The complexity and diversity of insurance products, such as property, casualty, life, and health, and financial products, can also make it challenging for new agents to gain a comprehensive understanding of the field.
Additionally, the compensation structure in the insurance industry may also contribute to attrition rates. Commissions are the most common form of compensation, especially for experienced agents. The amount of commission depends on various factors, including the type and amount of insurance sold and whether it is a new policy or a renewal. While commissions provide an opportunity for higher earnings, new agents may struggle to build a solid client base and achieve sales targets, impacting their income.
Moreover, the insurance industry is subject to regulatory and compliance requirements, which can be challenging for new agents to navigate. Obtaining the necessary licenses and certifications can be time-consuming and costly. For example, agents selling securities and other financial products must become licensed by the Financial Industry Regulatory Authority (FINRA) by passing the Series 6 or Series 7 exams. The time and resources required to fulfill these requirements may deter some new agents, contributing to the high attrition rate.
To address the high attrition rate, insurance companies should focus on comprehensive training and onboarding processes. Clearly defining roles and responsibilities, providing ongoing support, and helping new agents navigate the complexities of the industry can help improve retention rates. Additionally, companies should pay attention to underlying issues that may be contributing to attrition and make necessary improvements to create a positive work environment.
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Salary: $61,154 for under a year's experience, $79,205 for 10+ years
The insurance sales profession is expected to grow by 8% in the next 10 years, with about 47,100 openings projected each year. However, it is a challenging career choice, with a high attrition rate, especially in the first year. While the average salary for an insurance agent in the United States is around $56,882 to $72,290 per year, salaries vary depending on experience, location, education level, and company size.
For insurance agents with less than a year of experience, the average salary is $61,154. This is a competitive salary, considering that 30% of new agents leave within their first 90 days, and more than 90% quit the business within the first year. The high attrition rate is partly due to the challenges of the job, which include meeting sales targets and acquiring new customers, as many clients now purchase insurance online.
With 1 to 2 years of experience, the average salary is $61,055. This small decrease in salary may be due to agents leaving the profession within the first two years, potentially due to the difficulties of the job.
For those who stay in the profession, the salary increases with experience. Insurance agents with 6 to 9 years of experience earn an average of $72,990, and those with over 10 years of experience can expect to earn around $79,205. Experienced agents are often compensated with commissions, especially those involved with financial planning, who may receive fees for their services.
Location also plays a significant factor in salary. For example, in Boston, MA, the average insurance agent salary is $63,440, while in California, it is $62,740. In high-cost cities like San Francisco, CA, the average salary is $71,039, while in New York, NY, it is $65,920.
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Pass rates: 57.9% pass licensing exams, ranging from 28.73% to 81.54%
Passing the licensing exams is a crucial step for aspiring insurance agents to enter the industry. In 2022, 382,913 people took the licensing exams for the first time, with an overall pass rate of 57.9%. This translates to 221,568 individuals successfully obtaining their licenses. However, this pass rate varies significantly across different states and exam categories, ranging from a high of 81.54% to a low of 28.73%.
The highest pass rate of 81.54% was achieved in the Personal Lines license exam in Indiana, with 424 out of 520 candidates passing. This exam's high pass rate is notable and stands out among the various licensing exams. On the other hand, the Casualty Insurance Broker Exam in North Dakota presented a significant challenge, with only 28.73% of candidates succeeding, the lowest pass rate across all states. Of the 181 individuals who took this exam, only 52 passed.
A closer look at specific states reveals interesting trends in their licensing exam pass rates. Rhode Island consistently performs well, with no pass rates falling below 60%. Notably, their Personal Lines category boasts an impressive 79.07% pass rate, showcasing the state's strength in this area. South Carolina displays a spectrum of pass rates, with the Life and Health category leading the way at 58.00%, followed by Health and Property categories with strong showings of 54.52% and 52.27%, respectively.
Alabama and Alaska also demonstrate varying pass rates across their insurance license exams. Alabama's Life and Health insurance exam had the highest number of test-takers at 1560, with a first-time pass rate of 70%. In contrast, Alaska's Life insurance exam stood out with a 63.18% pass rate, while their Casualty exam achieved a commendable 57.06% pass rate.
The range of pass rates across states and exam categories highlights the challenges aspiring insurance agents face in obtaining their licenses. While some exams present higher hurdles than others, the overall pass rate of 57.9% indicates that a significant number of candidates successfully navigate the licensing process in their first year.
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Job outlook: 8% growth expected by 2032, 47,100 openings annually
The insurance agent sector has a positive outlook, despite consumers increasingly buying insurance online. People still need guidance when purchasing policies, and the number of insurance agents is expected to grow by 8% in the next 10 years. This growth is projected to be from 536,800 jobs in 2022 to 579,300 in 2032.
Insurance sales agents are responsible for building a customer base, explaining policies, answering customers' questions, selling policies, and helping customers keep their policies up to date. They commonly sell one or more types of insurance, such as property and casualty, life, health, and long-term care.
The largest employers of insurance sales agents are office settings, although they may travel to meet with clients. Most insurance sales agents work full time, and commissions are the most common form of compensation, especially for experienced agents. The amount of commission depends on the type and amount of insurance sold and whether it is a new policy or a renewal.
About 47,100 openings for insurance sales agents are projected each year on average over the decade. Many of these openings are expected to result from the need to replace workers who transfer to different occupations or exit the workforce.
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Commissions: the most common form of compensation, with bonuses for targets
Commissions are the most common form of compensation for insurance agents, especially those with more experience. The amount of commission depends on the type and amount of insurance sold and whether it is a new policy or a renewal. For instance, a policy with a $1200 annual premium and a 15% commission rate would earn an agent $180 per policy. Life and health insurance policies yield a larger percentage of the sale when a client first signs up, but agents can also make money from renewals, though this tends to be a smaller percentage. For example, an agent selling a health insurance policy for $1800 per year might receive a 90%/5% commission, earning them $1620 in the first year and $90 in each subsequent year. Captive agents selling home and car insurance will typically earn a 5% to 10% commission in the first year's premium.
Agents can also receive bonuses when they meet sales targets or when their agency hits a profit goal. Some agents involved in financial planning may receive a fee for their services rather than a commission. The median annual wage for insurance sales agents was $59,080 in May 2023, with the lowest 10% earning less than $34,940 and the highest 10% earning more than $134,420. However, it is important to note that many factors can influence an agent's earnings, such as their performance, adaptability to changes, self-promotion, and location. A big city, for instance, will offer more opportunities to find new customers than a small town.
The job of an insurance sales agent involves contacting potential clients to expand their customer base, interviewing clients to understand their financial situation and existing coverage, explaining various insurance policies, analyzing clients' current policies, and suggesting additions or changes. They commonly sell property, casualty, life, health, and long-term care insurance.
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Frequently asked questions
According to Investopedia, more than 90% of new insurance agents quit the business within the first year.
In 2022, there were approximately 927,600 insurance agents in agencies and brokerages, an increase from 886,600 in 2021.
The average salary for an insurance agent varies depending on experience. Anonymous submissions by insurance agents show that those with less than one year of experience earn $61,154, while those with 1 to 2 years of experience earn $61,055. The median annual wage for insurance sales agents was $59,080 in May 2023.
The average age of an employed insurance agent is 45 years old.
Insurance agents commonly sell property, casualty, life, health, auto, and long-term care insurance.
