I read an article last week that discussed an underserved market in the life insurance industry - the under age 45 demographic. They provided some statistics and attempted to quantify the opportunity that exists in pursuing these younger clients, and it made me think: If this is such an underserved market, there has to be a reason (You can read the article here.). The next question, of course, was what is that reason?

I think it really comes down to money, or more specifically, profitability. If an agent is going to spend the time and energy that it takes to create and execute on a marketing plan, there needs to be sufficient reward at the end to make it worth their time. Have you seen insurance premiums lately on the under age 45 crowd? They are astoundingly low when you think about the check the insurance company could end up writing (Average Preferred Nonsmoker premium when I run a quick term quote? $600 for $500K averaging 10, 15, 20 and 30 year term). As are the commissions an agent can expect to receive for their trouble.

OK, that is a bit of a challenge, but what if I sell permanent products? The commissions will be higher and the business will profitable. Nice in theory, difficult to execute in practice. Why? A couple reasons:

Conditioning - There is an absolute avalanche of material on line and in the media telling these prospects to buy term. The only voice they may hear talking about permanent insurance is yours.

The Internet - This demographic shops on line. A lot. Which means that even if there is not another agent involved, you are still in competition. The only problem is that you don't really know who you are competing with!

The economy - While this may be a temporary phenomenon, limited funds to allocate to life insurance premiums is a fact of life for many in this group.

Which brings us back to profitability. Most agents are not excited about working for a small commission, and having to deal with questions about some rate that the prospect found on line. So rather than focus on a demographic that is a pain in the neck and has questionable profitability, many agents simply don't market to this group. As much as it may upset some people in our business, I think the agent that reaches this conclusion is absolutely right.

Even when I take a more altruistic view and think about the value a good agent does bring to the table (helping navigate underwriting, thinking about conversion language, avoiding B rated carrier), what is the marginal value of that agent? In actual premium dollars, it is usually not that significant an amount. Death benefits are paid on in force contracts even if the carrier in question is not the strongest financially. In fact, I have heard it said that carrier insolvency has never resulted in a death claim not being paid (something to investigate in the future?).

The bottom line for me on this is that there are some markets in our business that amount to pro bono work, and no producer can afford to do too much of it before they find themselves out of business. Of course, it is not simply a matter of not doing too much of this type of business, you need to put something in its place, and it better be more profitable if you want to keep your doors open.