Death Of Life Insurance Agent

MetLife Inc. is preparing to part ways with a central force in the company’s history: its life-insurance agents. The nation’s largest life insurer by assets is in talks to sell a network of about 4,000 sales people to Massachusetts Mutual Life Insurance Co. It is “the end of an era for MetLife.

A sale of MetLife’s agent army would sever ties with an important contributor to the company’s rise as a nationwide giant. Decades ago MetLife had some 14,000 agents. For many years, they walked door to door to make sales and collect premiums. They became a fixture of American culture often portrayed in movies and television shows such as “Father Knows Best.”


The potential move is part of a larger effort by MetLife to slim down and respond to a shifting regulatory environment. It decided in January to divest a large piece of its U.S. life-insurance unit to reduce some of the capital burden it is expected to face under new federal regulations.

The talks also are a sign of the times for the life-insurance business broadly. Life-insurance agents at MetLife and other large companies began dropping in number as mutual funds gave families savings alternatives, and sales-practice scandals led to widespread class-action litigation and settlements.

Industrywide sales of individual life-insurance policies have dropped 45% since the mid-1980s, according to the most recent data available from industry-funded research firm Limra. About 30% of American households have no life insurance at all, up from 19% about 30 years ago.

Meanwhile, the number of full-time U.S. agents affiliated with a specific company like MetLife dipped to 145,000 in 2013, according to the most recent information available from Limra. At the industry’s height in the 1970s, more than 250,000 agents were attached to specific companies, according to a different Limra calculation.

MetLife and other publicly traded life insurers increasingly have turned to independent financial advisers, stockbrokers, banks and direct marketing for help as their sales networks diminished. In the past, MetLife has even experimented with touch-screen-equipped kiosks at Wal-Mart Stores

Tougher regulations have made it even more difficult to keep large sales armies in place as insurers spend more heavily on training, compliance and other monitoring. Insurers often spend tens of thousands of dollars for each agent in the initial years, on everything from income subsidies to medical benefits. “It’s no secret a career agency system is an expensive proposition,” said Piper Jaffray analyst John Nadel.

What set MetLife’s decision in motion was its designation by the U.S. as “systemically important” under the 2010 Dodd-Frank financial-regulatory overhaul law. That means regulators believe the company could pose significant risks to the financial system should it collapse. The law requires that those firms hold extra capital.

MetLife is challenging that designation in federal court and it cited the law’s requirements as a reason for its decision last month to spin off, sell or take public a piece of its U.S. life-insurance unit.
Another U.S. insurer labeled systemically important, American International Group Inc. also announced last month that it would sell its adviser group, striking a deal with a private-equity firm and a Canadian pension-fund manager. That group operates with roughly 5,000 independent advisers that sell products from AIG and others. The sales price is $400 million to $500 million, according to people familiar with that transaction.

An additional driver away from big agent networks, analysts said, is a proposed Labor Department rule that would require advisers working with retirement accounts to act as fiduciaries, putting their clients’ interest first.

The potential buyer, Springfield, Mass.-based Massachusetts Mutual, currently has about 5,600 agents. Also known as MassMutual, it is one of a small number of prominent life insurers owned by their policyholders. The deal being discussed would be $200 million to $400 million, said a person familiar with the matter.


Insurers owned by policyholders have remained committed to career sales forces despite the pullback by publicly traded rivals. New York Life Insurance Co., for example, has 12,000 agents, according to a spokesman. Because these companies don’t report earnings quarterly, they face less pressure to bring down the costs associated with recruiting and training agents.

Some agents that currently sell MetLife products say they expect little to change day to day because both firms allow salespeople to offer a range of life-insurance products. But it is unclear whether and how agent compensation structures might change if the deal is completed, they said.