Life Insurance Agents: How Many Are There In The Us?

Life insurance is a hard sell. It's a challenge to convince a prospect to acknowledge and discuss their mortality, and then to create a sense of urgency around buying a policy. But for those who can stick it out, a career in life insurance sales can be lucrative. In 2020, there were 409,950 life insurance agents in the United States, according to the Bureau of Labor Statistics. That's one agent for every 1,234 people. The industry is highly competitive, and the burnout rate is high, with more than 90% of new agents quitting within the first year. But for those who can make it work, the rewards can be significant.

There were 409,950 life insurance agents in the US in 2020

The US life insurance industry is highly competitive, with a high burnout rate. Over 90% of new agents quit within the first year, and this number rises to over 95% when extended to five years. This is largely because most life insurance sales jobs are commission-based, with no base salary or benefits. As a result, many agents struggle to make a living, especially in the early days before they have built up a solid client base.

Life insurance is a difficult product to sell. Unlike a car, boat, or timeshare, it offers no instant gratification to the customer. In fact, it only provides benefits once the policyholder has died. This makes it hard for agents to create a sense of urgency for prospective clients.

Despite the challenges, the life insurance industry in the US is attractive to many because it is relatively easy to become a life insurance agent. No educational requirements exist beyond a high school diploma, and some states only require a licensing course and exam. The industry also offers abundant job prospects and the potential for high earnings through commissions and passive income.

The US is home to one of the largest insurance markets in the world. The life/annuity insurance industry in the country generated a total revenue of over one trillion US dollars in 2022. The number of life insurance companies in the US has been decreasing year on year, with 727 life insurance companies in 2022, down from over 2,100 in 1990.

The US life insurance market is highly competitive

The competitive nature of the market pushes insurers to constantly innovate and differentiate their offerings. Additionally, the regulatory environment in the US, with its stringent compliance requirements and state-specific regulations, adds to the complexity of the market. Insurers must navigate this landscape to ensure compliance while meeting the diverse needs of customers across different states.

The US life insurance market is also influenced by underlying macroeconomic factors. Factors such as interest rates, employment levels, and income growth impact consumer purchasing power and willingness to invest in life insurance. Demographic shifts, such as an aging population and changing family structures, further drive the demand for various types of life insurance products tailored to different life stages and financial goals.

The high competition in the US life insurance market extends to the agent level as well. In 2020, there were 409,950 life insurance agents serving a population of over 332 million, resulting in one agent for every 1,234 people. The high competition and commission-based pay structure can make it challenging for new agents to succeed, with a burnout rate of over 90% in the first year.

Overall, the US life insurance market is highly competitive, dynamic, and responsive to the changing needs and preferences of consumers.

Life insurance agents are typically paid on commission

Life insurance agents typically earn through commissions, bonuses, or salaries, depending on the type of policy sold and the insurance provider. Commissions can play a role in which life insurance policies agents promote and how much you pay.

Commissions vary by policy and company, but life insurance agents usually receive 60% to 80% of the premiums paid in the first year as their commission. In subsequent years, they collect smaller commissions, typically between 2% and 10%. Over the life of the policy, 5% to 10% of the premiums paid may go towards commissions.

Permanent policies, such as whole life insurance, often do not build cash value in the first year or two due to commissions and other expenses incurred by insurers when issuing these policies. Whole life insurance commissions tend to be higher than term life insurance commissions because of higher premiums and longer policy durations.

Life insurance agents can be classified into two types: captive agents and independent agents. Captive agents work for a single insurance company and only offer that company's products. They may receive a base salary, commissions, and benefits. Their commission percentage is usually lower if they receive a base salary. Independent life insurance agents represent multiple insurers and earn income only through commissions. This flexibility often leads to a competitive salary as they can offer a wider range of products.

The average annual salary for life insurance agents is $79,700, according to the Bureau of Labor Statistics. The income potential for life insurance agents can vary depending on their location, experience, certifications, the types of policies they sell, and how they operate.

The burnout rate for life insurance agents is high

The life insurance industry in the US is vast, with around 410,000 life insurance agents in 2020. This number equates to roughly one agent for every 1,234 people. However, the burnout rate for life insurance agents is high, with more than 90% of new agents quitting within the first year, and over 95% quitting within five years.

There are several factors contributing to the high burnout rate among life insurance agents. One of the most significant reasons is the challenge of earning a living in an industry that primarily compensates its agents through commissions from sales. As independent contractors, life insurance agents do not receive a base salary, benefits, or guaranteed weekly pay. This means that they can work over 40 hours a week and still not earn a paycheck if they don't make any sales. While some companies offer a small base salary and benefits to their sales reps, these agents are typically held to rigid production quotas and can be fired if they don't meet their monthly sales targets.

The job itself is also demanding and stressful. Agents must constantly find new prospects, which can be challenging even with the power of the internet. Many insurance companies recruit new agents by promising abundant leads, but these leads are often scarce and difficult to convert. Agents who rely on company-provided leads may find themselves working with leads that have already been contacted by several other agents, making it even harder to make a sale. Exclusive leads, which are more likely to result in a sale, are very expensive, putting further financial strain on the agent. As a result, many agents resort to cold-calling and door-knocking, which require perseverance and the ability to handle frequent rejection.

Selling life insurance is also a difficult task. Unlike selling a car or a timeshare, life insurance offers no instant gratification or tangible benefits to the customer. Agents must first convince prospects to acknowledge and discuss their mortality, which is a challenging topic for many people. Creating a sense of urgency to encourage immediate purchases is another hurdle that agents must navigate.

The high burnout rate among life insurance agents has negative consequences for both policyholders and insurance carriers, including reduced customer retention rates, decreased revenue, and lower satisfaction scores. However, there are strategies that agents can use to reduce burnout, such as adopting a healthy diet and exercise routine, getting enough sleep, and connecting with coworkers and family outside of work.

The US insurance industry is relatively stable and recession-proof

Being a mutual company, answering to policyholders instead of Wall Street, also grants insurance companies a relatively high level of independence from economic fluctuations. However, the industry is not entirely immune to economic shifts. For example, rising gas prices may cause consumers to forego purchasing a second car or a house extension, resulting in fewer policies sold. At the same time, crime levels tend to rise during recessions, leading to higher claims and payouts for insurance companies. Thus, the economic situation and the insurance industry are interdependent, with both needing each other for prosperity and stability.

While the industry is resilient, individual insurance agents may struggle. The life insurance industry, for example, is highly competitive, and new agents typically work on commission. The burnout rate is high, with over 90% of new agents quitting within the first year. Many agents struggle to find prospects and leads, and the rejection rate is high. As a result, agents often resort to cold-calling and door-knocking, which require perseverance and thick skin.

Despite the challenges, selling life insurance offers some unique benefits. It is relatively easy to become an agent, as no educational requirements exist beyond a high school diploma, and some states only require a licensing course and exam. Abundant job opportunities are available, and the commissions are typically very high compared to other types of insurance. Successful agents can also build up enough renewal commissions over time to have a comfortable income without needing to sell new policies.

Frequently asked questions