The Myth of the Evil Insurance Salesman

For years, media types and fee-for-service consultants have shouted commissioned salespeople into a dark ugly corner. This bullying reinforces the stereotype that commissioned sales professionals twist the arms of unsuspecting persons in an effort to enrich themselves.

While this sort of stories certainly makes for good entertainment (and tasty marketing morsels for the slick brochures of aforementioned consultants), it does little else. Since our primary reason for existing is to be a resource of useful life insurance info, we will focus this discussion (evil commissioned salespeople) through the insurance lens.

Insurance Agents are Commission Hungry Monsters

You don’t have to look very hard on ye olde interwebs to find a whole host of people decrying insurance agents as the bane of everyone’s existence. According to those “in the know,” we (insurance agents) have a propensity to lie, cheat, and steal from everyone. And, apparently, we are most definitely in cahoots with the very insurance companies whose products we sell in a vast conspiracy to trick everyone out of their last dollar. You know that our suits are sewn with gold thread and our hallways have diamond cobblestones…right?

Personally, I’ve never understood how insurance agents could have the bad reputations of being both knuckle-dragging neanderthals and crafty wizards of deceit. But, I suppose when you’re trying to make a point that lacks evidence, almost any sort of logic will do just fine.

Have you ever noticed the anecdotal nature of these edicts against insurance agents?

Harry was mislead by Joe, the insurance agent scumbag, and so it follows that all insurance agents and insurance products need to be avoided or demonized. Not to worry, though; it seems that the fee-for-service folks can evaluate these products for a price so that their biased opinions steer you in what they consider to be “the right direction.” In case you haven’t noticed, our sarcasm light is on and glowing red-hot.

Thankfully, the data tells a different story…

How many Complaints do we Actually Hear?

The National Association of Insurance Commissioners (NAIC) gathers all complaints received by the 50 insurance commissioners in the United States and releases the data annually.

How many complaints were there in 2014? Roughly 59,851.

How many of those 59,851 complaints involved sales or marketing (the category that covers all of the evil things insurance agents and companies do to people)?

Slightly less than 3.6% or 2,145 in total.

In other words, sales and marketing as an entire category barely breaks the top 10 when ranked for individual (i.e., sub category) complaints.

However, even that number is an over-representation of how much actual evil insurance agents and insurance companies are up to because the sales and marketing category includes other infractions.

These other infractions include such things as not being appointed with a carrier, not submitting the application in a timely manner, and broadly categorizing state-specific infractions that are bureaucratic obstacles used by states to generate fee/fine revenue.

The actual number of complaints for misrepresentation (lying about the features of a product) was slightly less than 1% at 596 complaints for 2014.

Now, I’ll readily admit that it’s unfortunate to have 596 problems arise where an insurance agent misrepresents an insurance policy to a prospective buyer. There’s no excuse for that sort of behavior.

That being said, there are bad apples in every industry. We need to keep things in perspective and not throw the baby out with the bathwater. Just because there are bad people doing bad things doesn’t mean the product or the industry are complicit.

The suggestion that insurance agents are roaming the streets looking for their next victim is sensationalized poppycock.

Consider the following statistics from the investment industry (a close relative of the insurance industry).

The Financial Industry Regulatory Authority (FINRA) barred or sanctioned 1,099 investment professionals in 2013 (2014 data isn’t yet available, but to keep the numbers consistent to the year, there were 440 complaints of misrepresentation in 2013 according to the NAIC).

This isn’t the number of complaints – that was much higher – but the number of times FINRA looked into the situation and actually found misconduct worthy of action.  The NAIC numbers report complaints only, so we don’t know exactly how many of the 596 were legitimately misconduct.

What’s more interesting and relevant when comparing those statistics is that fact that the Bureau of Labor Statistics tells us there are nearly 2x as many insurance agents as there are investment professionals.

If It Bleeds It Leads, or at least makes somebody Money

While there are definitely times when insurance agents do bad things and commit actions worthy of reprimand, such is no more common in the field of life insurance than any other industry.

However, the myth of the evil insurance salesman may be a great story for conjuring up mistrust and creating a market for certain someones. But, if you approach insurance the way most people do – and conduct a little due diligence using common sense – chances are pretty good that you’ll be just fine.