A career in life insurance : sales, actuaries, underwriters, claims : high earnings, stable profession, without graduate school

A CAREER IN

LIFE INSURANCE

Institute Research Number 40 ISBN 1-58511-040-X DOT Number 250.257-010 O*Net SOC Code 41-3021.00

A CAREER IN

LIFE INSURANCE SALES – ACTUARIES – UNDERWRITERS – CLAIMS HIGH EARNINGS STABLE PROFESSION WITHOUT GRADUATE SCHOOL “I DON’T WANT TO TELL YOU HOW MUCH INSURANCE I CARRY WITH THE

Prudential,” the comedian Jack Benny used to quip, “but all I can say is, when I go, they go too.” An obvious exaggeration for the sake of comedy. (Benny was also said to be such a cheapskate that when a mugger demanded, “Your money or your life!” he replied, “Wait, I’m thinking about it.”) Still, the wisecrack has an element of truth to it. Insurance is in the business of risk, and it can be a risky business. It is the collective job of the team of life insurance salespeople, underwriters, actuaries, and investigators to make sure that insurance companies are financially sound, that premiums are appropriately priced for each policyholder, that payments can be made to claimants without the whole outfit going bankrupt. (Premiums refer to the amount paid for an insurance policy, usually in installments.) Nobody wants to contemplate his or her own mortality. But the alternative is to risk the possibility of premature death that leaves dependents or loved ones unprovided for. Life insurance protects against financial loss in the midst of personal loss. It can guarantee that children are educated, a spouse can remain in the family home, or elderly parents will receive a retirement income. The simplest type of life insurance policy, and usually the cheapest, is term insurance, which provides protection for a specific 2

period of time (20 years, for instance, or until the policyholder turns 60). At the end of that period, if the policyholder wants to renew, the premium increases. If the policyholder dies within the period stipulated in the contract – the “term” – the named beneficiary receives the agreed-upon amount of money. A different type of policy, whole life insurance provides lifelong protection, and there is always a payout since the policyholder’s eventual death is inevitable. An annuity is another financial product issued by life insurers, and is designed to provide a steady allowance, for example, during retirement years. There are different types of term insurance and several versions of whole life insurance; there are tax-deferred and investment options; and endless add-ons and customizations can be made to any policy, but you don’t need to learn about them until you’re selling, pricing, writing, or investigating policies yourself. The life insurance industry is made up of insurers, or insurance carriers, large companies that invest the money accumulated from premium payments from policyholders so that it can pay out the claims to beneficiaries; and insurance agencies, which serve as the liaison between insurance carriers and customers. Some agents sell the insurance and financial products of just one insurance carrier; they are called captive agents. Others are independent agents who represent a number of different insurance providers. Independent agents can do research on behalf of their clients to get them the best value for their money and can put together a package with the policies and services that best meet clients’ needs. In addition to life insurance, such a package may include investments and securities. Agents are also increasingly qualified to offer financial planning services.

There are excellent career opportunities in the

trillion-dollar life insurance industry, requiring a diversity of skills and offering a variety of benefits and rewards, so keep reading!

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EXPLORING THIS CAREER BECAUSE THERE ARE SEVERAL DIFFERENT CAREER PATHS IN THE LIFE INSURANCE

industry, there are different ways to explore and prepare for a career in this field. A good first step might be to look into an educational program called Insurance Vocational Education Student Training (InVEST), which is sponsored and administered by the Independent Insurance Agents of America and is endorsed by the National Association of Insurance Women. The mission of InVEST is to educate students about the insurance industry and its diverse careers. It provides practical training and experience, honing students’ talents into marketable skills. The program is also designed to strengthen the insurance industry by attracting a large pool of qualified recruits. An impressive two-thirds of InVEST graduates enter some facet of the insurance industry. The program, which can be implemented in any school or community center, provides classroom assistance, job placement, internships, industry guest speakers, field trips, prizes, and scholarships. It uses the simulation concept where students establish and run mock insurance agencies and home-based insurance practices. Students sell policies, review and process applications, rate applicants, perform bookkeeping, and handle claims. A step by step guide to implementing this program is available on the InVEST Web site at www.investprogram.org. Also on the site is an interactive quiz to help you determine whether you have the qualities necessary to be a successful independent insurance agent. The bottom line is that you should enjoy working with both people and numbers, prefer to express your entrepreneurial spirit within a structure, don’t require total job security in a bureaucracy, are willing to both work in an office and travel locally or regionally, and would rather advance by making your own enterprise grow than by climbing a corporate ladder. Practically the exact opposite description would depict the ideal career candidate to become an actuary in the insurance industry. The highly structured career path and upward mobility within a corporation that are typical of jobs in this specialty provide the stability and job security that many actuaries find appealing. Actuaries usually have college degrees in a mathematical discipline, such as actuarial science, calculus, or statistics; accounting, business administration, economics, corporate ethics or law, finance, or another 4

business field; or a technological discipline such as computers or engineering. To prepare for this career, you should take as many of these sorts of classes in high school as possible. The math courses in particular should be pursued to the highest level offered and should include college prep courses. This would also be the recommended curriculum for aspiring underwriters, with an emphasis on computers as well as math. Ask your librarian or a math teacher to help you investigate actuarial internships for high school students. These programs are particularly interested in attracting minority students. The Minority High School Scholars Academy for Mathematics-Actuarial Science Careers is one example. It is sponsored by Katie Insurance School, Department of Mathematics and Allstate Insurance Company and takes place on the campus of Illinois State University in Normal. You can find more information on internships online at this Web site: www.BeAnActuary.com Helping people manage their finances is an increasingly important part of the life insurance professional’s job, so the preparation recommended for future financial planners also applies here. These activities include investing in the stock market, which will tell you whether you have the stomach and the confidence to make financial decisions. (No shame if you don’t – that’s why people hire financial planners in the first place!) Join or start an investment club, in which members pool their money and agree on investment vehicles, and become its treasurer. Try to get your school involved in the National Endowment for Financial Education High School Financial Planning Program, which is designed to improve the financial literacy of America’s youth in the areas of goal setting, budgeting, and saving. It is provided free of charge. Here is the Web site: www.nefe.org/pages /educational.html If you plan to become a life insurance sales agent, you may be able to improve your sales techniques with classes in psychology and sociology, to help you understand why people behave the way they do, and public speaking, which will help you make persuasive presentations. But nothing you can learn in a classroom is as valuable as the experience of selling itself – even if it’s just homemade ices from a cart attached to your bike. Especially if it’s just homemade ices from a cart attached to your bike, because you are more personally invested 5

in the process than if you are just ringing up jeans sales at the mall. You have more to gain, and more to lose. Pride, self-confidence, disappointment, discouragement are at stake. All salespeople must learn not to take rejection personally, and if you start now you will be way ahead of the game.

HISTORY OF THIS CAREER MERCHANTS AND TRADERS IN THE ANCIENT CIVILIZATIONS OF CHINA, BABYLON,

and Phoenicia pooled their resources and shared their risks to protect against loss. The earliest insurance initiatives were designed for merchants engaged in especially risky commercial ventures, for example, if a ship did not reach its destination intact or failed to return to pay the merchant for the sold merchandise. The trader would borrow money using the seagoing goods as collateral; if the ship returned with the merchant’s payment, he repaid the moneylender for the loan, plus interest, plus a premium for the insurance. If the ship did not return, the debt was forgiven. Lenders found this practice to be very profitable for ships returned more often than not and merchants were happy to pay extra for the guarantee that one catastrophic shipwreck or unscrupulous crew would not put them out of business. Ancient Rome seems to have been the birthplace of life insurance. There, burial clubs or associations covered funeral expenses for members, who made regular payments during their lifetimes, and provided financial assistance to the family members of the deceased. Around 220 AD, a Roman public official and legal scholar had devised perhaps the world’s first mortality table. A mortality table calculates life expectancies for people with various characteristics (for instance, economic status and gender) and at different ages. Today, these tables are prepared by actuaries and are an indispensable tool for the life insurance industry. Guilds, which were sort of the Medieval version of a labor union and were formed by practitioners of different crafts, took care of their members’ families in much the way life insurance carriers care for their policyholders today. Some even guaranteed the payment of ransom in the event a member was kidnapped by pirates! But life insurance became prevalent much more slowly than other types of insurance, such as fire, because it involved two practices that were illegal in many

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places: usury, or the charging of interest on borrowed money; and placing stakes on a particular outcome, which was considered betting. In 1693, the astronomer Edmund Halley, for whom the comet is named, developed the first mortality table based on statistical principles. Halley used baptism and death records and the laws of compound interest to calculate the appropriate price for life insurance products and the value of an annuity. The first life insurance carrier in the United States was incorporated by the Synod of the Presbyterian Church in Philadelphia in 1759. The Corporation for Relief of Poor and Distressed Presbyterian Ministers and of the Poor and Distressed Widows and Children of Presbyterian Ministers solicited funds from congregations, church elders, and ecclesiastical councils. In addition to providing financial relief to ministers and their widows and orphans, the foundation lent money to the Continental Congress to finance the battle for independence. Around 1810, life insurance began to be sold to the general public, and there was a great need for it. With industrialization, Americans left their farms for the city, which put them at greater risk both financially and physically, and epidemics (yellow fever) and diseases (tuberculosis) often ensued from overcrowding and unsanitary living conditions. The Civil War and conflicts related to the United States’ expansion westward meant that a certain longevity was by no means guaranteed. Seven leading life insurance companies were established between 1843 and 1847, all of which are still in operation. By 1850, the total value of existing life insurance coverage in the US exceeded $97 million; within two decades, that figure would approach $175 million. In the mid-19th century, financial misjudgments made in the fervent struggle to acquire customers forced several insurance companies to declare bankruptcy. States began to form regulatory bodies to monitor the industry, which ruled, for instance, that insurers must deposit reserve funds with state treasuries and prepare annual reports describing their current state of operations. A national economic depression in the 1870s adversely affected many financial institutions, but the insurance industry was revived by the increasing need for insurance brought on by spreading urbanization and industrialization. In addition to life insurance, a demand was developing for auto liability insurance, property insurance, disability insurance to replace income lost due to illness or injury, workers’ 7

compensation to protect employees whose illness or injury was job related, and industrial life insurance for low-income workers. Among the innovations in life policies around 1900 were the cash surrender option, in which the policyholder terminates a permanent life insurance policy for a reason other than the death of the party insured under it. The cash surrender value depends on the holder’s contract and equals the cash value minus surrender fees charged by the insurance carrier. When the United States entered World War I, a substantial amendment was made to the War Risk Insurance Act enabling the federal government to provide life insurance for servicemen. Commercial insurance companies were reluctant to underwrite coverage for members of the military since death rates during wartime are impossible to predict; therefore, insuring servicemen was an extremely risky business operation. Ninety-three percent of the eligible candidates accepted the government’s offer, and the majority chose coverage in the maximum amount of $10,000. This made the US government the nation’s largest life insurer. During the Depression, the amount of insurance sold plummeted; death rates were high, forcing payouts to some policyholders, while other policyholders were unable to pay their premiums; and economic circumstances enfeebled insurance companies’ investment holdings. But the industry recovered once again. When the Depression was over, Americans began to seek financial security. After World War II, the United States enjoyed a flush of prosperity that lasted into the 1960s. Millions of Americans were able to retire and enjoy their golden years living comfortably, traveling and pursuing their hobbies, financed by Social Security, investment income, pensions, and proceeds from the sale of their family homes.

We are living longer, so we must retire later; the

Social Security system is in trouble; employer bankrolled retirement plans are becoming rarer. All of these factors have contributed to the evolution of the life insurance agent from mere salesperson to financial planner and consultant, and to the formation of a vital and growing industry that has $2 trillion invested in capital markets. 8

WHERE YOU WILL WORK LIFE INSURANCE AGENTS MAY BE employed directly by life insurance

carriers, but most work for independent life insurance agencies. Life insurance agents may also be employed by the different types of institutions that sell insurance, such as banks and securities brokers. Independent agents are self-employed and operate as a small business. About one-third of insurance sales agents are self-employed independent contractors. Many insurance claims adjusters work from home or telecommute, visiting their offices perhaps once a week. In contrast, far fewer insurance claims appraisers, examiners, and investigators are self-employed – perhaps just one in 50. The vast majority in these specialties are employed by insurance carriers to prevent fraud, although agencies, brokerages, independent adjusting firms, and claims processing outfits also hire them. Insurance companies and agencies are located in suburban areas and small towns, but the majority are in large cities. Practitioners in this field work from offices, although they may travel short distances to meet with clients. About 70% of all salaried actuaries work in the insurance industry, including pension funds. Most of them work in the large urban centers where insurance carriers are headquartered. Underwriters, too, are employed by insurers.

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THE WORK YOU WILL DO Sales A life insurance salesperson’s job consists of three main components, each of which involves a multitude of tasks: prospecting, selling, and maintenance. The purpose of prospecting is to add to the base of clients. Individuals, corporations, credit unions, and other entities are just prospects until they sign on to become clients. Selling is self-explanatory, but perhaps trickier and more sophisticated than it sounds. The third part involves maintaining relationships with current clients as well as with promising prospects. Locating and courting new clients is especially important for agents who work on a commission-only basis. Cold calling is one way to generate business. It simply means phoning prospects, usually from a list that has been narrowed down by zip code, area code, or telephone exchange so you can be sure you’re approaching people who live in your area. The purpose of a cold call is not to sell over the telephone, but to set up an appointment. Sales professionals say that within 15 seconds you have to give the prospect a reason not to hang up on you, so your introduction must be both brief and compelling. If the prospect does not want to meet, you can follow up with a personal letter expressing your appreciation for the person’s time and your hope that you can work together in the future. You can also purchase names, telephone numbers, and addresses from list brokers that categorize people within a certain area according to income, family makeup, or age. Based on this information, you can make calls or send letters in which you address what you presume to be each individual’s personal life insurance needs. Speaking at public seminars on financial management or related topics is another way life insurance salespeople can reach potential clients. Presenting yourself as an expert before a group of people, and then proving that you are one, is a great way to establish credibility and trust. Some salespeople and insurance carriers send out informative newsletters that are mailed to their prospective client base as a promotional tool. Following up on previous clients or prospects who expressed interest but declined to buy is another prospecting technique. Increasingly, consumers do online research when they are 10

interested in buying an insurance policy. Many Web sites collect their personal information and distribute it to salespeople who have signed up for the service. This is a legitimate way to do business, and the prospects are good leads since they already intend to buy insurance. Selling, as a profession, can be so profitable and yet so difficult to accomplish. There is an infinite array of written material, experts and conferences that will reveal to you the “one true secret” to selling success, for a price. But the basics are simple, and effective salespeople of life insurance or anything else never forget them. Opinions are formed within seconds of a meeting, so sales professionals always keep in mind that one never gets a second chance to make a first impression. Selling has always been about relationships, and the effective salesperson is not only pleasant to be around but sincere. When you say you have the prospective client’s best interests at heart, you must mean it. Qualifying is an important step. It marks the beginning of the questioning process that will proceed, if your sales efforts succeed, until the prospect becomes a client. During this process, the salesperson and the prospective client agree on the latter’s needs. Qualification reveals to the salesperson the client’s values, interests, and goals and encourages the client to focus on these matters, thereby becoming more open to the idea that what the salesperson is offering is something that is in fact needed. These needs may range from the purely pragmatic to the highly emotional, particularly when discussing life insurance. The salesperson asks both close-ended questions that have a simple answer (“What is your current income?”) and open ended questions that do not (“Where do you hope to be in five years?”). Based on the information, the salesperson then makes recommendations for the most appropriate coverage and financial products. In addition, there is a growing tendency for one agent to sell multiple lines of insurance, such as medical and health, property (which protects the business of the insured party against direct physical damage or loss of assets), and casualty (which protects the insured party from liability resulting from injury or death to individuals or from damage to property). Typically, the next step in the sales process is the objection, when the client tries to avoid buying the policy because it’s too expensive, wants to consult with someone else first, or wants to shop around. This delaying tactic is a reflection of human nature and not the skills of 11

the salesperson. It is a judgment call whether to continue to try to close the sale immediately or to be gracious, cut your losses, and move on. Maintaining relationships with current clients and keeping track of changes in their lives that may warrant the purchase of a different policy or financial product are critically important. For one thing, you gave them the implicit or explicit promise that you would take care of them, their families, and their businesses. Also, happy clients will mention you by name, and word-of-mouth is the most effective form of advertising (and it’s free!). When you contact a referral or a referred party contacts you, you are way ahead of the game because you already know the person is interested in buying life insurance from you.

Actuarial It is customary for actuarial trainees to rotate among different job assignments every 18 months or so. The purpose is to provide a broad familiarity with various facets of actuarial work and insurance operations such as underwriting, marketing, product research and development, accounting, and data processing. Rotations are determined according to the trainee’s experience, examination level, and interests. Initially, tasks might include preparing data or correspondence for project managers, and evolve to the supervision of clerks, drafting of reports, and research. Senior actuaries may also volunteer to rotate, informally and on an unscheduled basis, to keep their skills sharp and re-familiarize themselves with different aspects of the job. Actuaries use mathematics knowledge and statistical techniques to assemble and analyze data. They calculate probability and risk, define complex problems, probe and scrutinize possible solutions, and reach expert conclusions. The projects they are engaged in include the design, development, pricing, and putting into service of life insurance products that are profitable, competitive with the products offered by rival companies, and meet the needs of current and future policyholders. Actuaries determine how much money an insurance carrier should invest, and where, so that sufficient funds will be available when policyholders claim them. They also forecast consumer demand for a new product or in a new region.

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Actuaries are often involved in long-term corporate planning, making financial projections and providing tax advice. They take their employer’s financial pulse by conducting studies comparing company statistics regarding death and disease rates, corporate expenses, and investment holdings with the industry average. They communicate their findings and clarify technical matters to executives, other members of the staff, including the sales force, government officials, and even policyholders. Advancement within the field depends in large part on success in the actuarial examination process, as well as satisfactory performance on the job. At Minnesota Life, the career path takes trainees through the following succession of titles prior to being named actuary: Assistant Actuarial Analyst, Actuarial Analyst, Senior Actuarial Associate, Assistant Actuary, Associate Actuary. Usually, top-ranking actuaries identify their status with the designation Fellow, Society of Actuaries after their names. Actuaries may be promoted to management or executive positions in other divisions of their companies, such as pensions or underwriting. Some actuaries with graduate degrees teach the next generation of mathematicians and statisticians at colleges and universities. Others become consultants and independent contractors. Many actuaries present testimony as expert witnesses in court, and can take continuing education courses to perfect their technique. (It can even become a profitable sideline or an occupation in itself.) A life insurance-related case may require an actuary to forecast the lifetime earnings of a person who lost his life in an accident. Actuaries are called upon to perform forward-looking calculations involving probability and risk in all manner of cases. Testifying is a challenge because the opposing attorney will try to discredit the actuary’s testimony and the actuary must defend the methodology in detail without causing the judge’s and jury’s eyes to glaze over. Charles L. McClenahan writes in Actuarial Review, “To those who enjoy it, nothing measures up to the opportunity to defend a well-grounded actuarial opinion against the onslaughts of an alternative presented by another professional.”

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Underwriting With their innate business sense and analytical ability enhanced by sophisticated computer applications, underwriters assess the ways in which emerging issues affect long-term risks associated with life insurance. They work with actuaries to establish premium rates and write policies. They evaluate insurance applications from both individuals and groups, along with supplemental materials such as medical records, and accept or reject the applicants. If they decide to issue the policy, they determine the appropriate cost of the premium. When insurance plans were simpler and carriers were less profit oriented, salespeople were able to approve or deny applications. This is no longer the case, so now underwriters occasionally accompany agents on sales calls to make presentations to prospects or to make the evaluations and provide the information the salesperson is no longer equipped to do. The underwriter is the key link between the carrier and the agent.

Claims Claims adjusters, appraisers, examiners, and investigators serve as a liaison between the insurer and the public with the mission of resolving claims equitably and promptly. They review causes of death, investigate accidents, consult with police officers, physicians, or other professionals; and interview witnesses and claimants. They prepare reports, including photographs and statements of witnesses or experts, to help them evaluate the claim. They also determine what exactly is covered by the insurance policy at issue and the amount the claimant is to be paid. They may authorize payments, negotiate settlements, resolve billing-related disputes, or testify in court if a claim is contested.

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LIFE INSURANCE PROFESSIONALS TELL YOU ABOUT THEIR CAREERS I Provide Insurance Consulting Services for Clients in the Miami Beach Area “Our firm helps clients prepare a personally tailored insurance plan that meets their needs. We work with their attorneys, accountants, brokers, and others to help them keep what they have, protect their families, and prepare for the future. We’re independent agents, so we represent a range of carriers of not just life insurance, but also health, disability, and long-term care. We also assist with estate and retirement planning. One of the key responsibilities in my position is helping clients figure out how much life insurance they need and whether it’s smart to treat it as an investment. Usually, it is not. There are better and more economical ways to pay for a child’s education and to plan financially for retirement. I would discourage single people with no dependents from buying a life insurance policy. Although anybody with an income and a dream needs to make a financial plan, it doesn’t necessarily have to include life insurance. Children don’t need life insurance unless they support the family, and I am disdainful of carriers that use fear to try to persuade parents they should buy such a policy. A better way to protect your child is to take out more life insurance on yourself. The amount of life insurance a person requires depends on how much money they need to replace and for what period of time. For example, someone with young children generally needs roughly nine times their annual salary to cover the children’s upbringing. It is my job to help clients make calculations of this nature. Life insurance is a foundation piece in wealth management. A financial/investment strategy is shaped like a pyramid. At the base you have your savings accounts, checking accounts, health insurance, and life insurance. These are resources you can count on if something bad happens, rainy day money.

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The next step upward toward risk includes mutual funds and annuities. Annuities are like reverse life insurance policies. In life insurance, you give us money over a period of time and if you die, your family gets a big check. With an annuity, you give us a big check and we pay you back over your lifetime. Its purpose is to provide retirement income so people don’t outlive their assets. There are two types of annuities: Deferred annuities have been popular for about 20 years; immediate annuities became very popular recently. At the top of the pyramid are the very risky investments: commodities, collectibles, and artwork. The best education for this career, in my opinion, comes from the life insurance industry itself, not from college. I myself have an undergraduate degree in psychology. Kids come out of school with degrees in finance, degrees in insurance, and they don’t have a handle on reality. All they know is theory. To prepare for this career, I recommend taking the continuing education courses that lead to designations like Life Underwriter Training Council Fellow LUTCF, Chartered Financial Consultant ChFC, both offered at The American College in Bryn Mawr, Pennsylvania, and Certified Life Underwriter. The National Association of Insurance and Financial Advisors also offers sales and skills training. I have earned the ChFC and LUTCF professional designations. I have taken courses leading to the Certified Financial Planner CFP designation, but I don’t intend to sit for the CFP examination because I don’t agree with their philosophy. They push fee-based planning, where the consultant gets paid by both the client and the financial institution, and I know from experience there is a way to do business in this field without making the client write a check. I’m independent, so I have my pick of just about anybody’s products. I believe this is in the best interest of the client. The client is who you have to keep happy, not the financial institution. If you have a successful business it doesn’t matter how you’re compensated, fee-based or commission-only.”

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I Am an Independent Life Insurance Agent in Charleston, West Virginia “I got into the life insurance industry back in 1995. I have a BS degree in agriculture and horticulture. I got tired of working for the government and wanted to try a career in sales. I currently use a lead-generation program by which customers send in a card saying that they are interested in a small life insurance policy for burial purposes. I locate their addresses and go visit them. I first let them talk and they will tell me what their desires and needs are. After a needs analysis I make a proposal to them, keeping in mind how much they can afford at the present time. Nobody wins if an agent sells a customer a policy with a premium that they cannot afford. The policy will lapse. Financial planning and wealth management play a big part in today’s life insurance sales. Long term care, disability income, Medicare supplement, and retirement income are just as important. I would advise anyone getting into this business to stay focused, make plenty of friends, be mentally strong, and don’t give up. This is a great business, but very hard.”

I Am an Actuary for a Life Insurance Company “Actuaries are mathematicians who assess the financial implications of future events that are likely, but not certain, to occur. Probability is the actuary’s stock-in-trade. In statistics, probability is expressed as a ratio that conveys the likelihood of something happening – in my case, average mortality rates, or the likelihood of somebody dying at a particular time. From this information, I calculate the amount of money the company must keep in reserve so it can pay policyholders and claimants as well as annuities and pensions. There is both routine work and special projects. The projects I have worked on over the years have included annuity product design and pricing, corporate valuation, disability projections, and helping to develop a reinsurance business from the ground up. Reinsurance is insurance taken out by an insurance company from another insurance company to protect from heavy losses resulting 17

from some catastrophic occurrence. Just like any type of insurance, reinsurance allows risk to be distributed among many parties. Reinsurance plays a role in managing loss from natural disasters and man-made tragedies like terrorist attacks. There are a lot of things to recommend this career. If you love statistics and logic puzzles, you’ll love your job as an actuary. It’s not about just solving problems, it’s also about figuring out how the problem should be solved. Your technical skills are valued, but so are your ideas. The earnings are great. I don’t think there is as much opportunity in the life insurance business as there used to be for actuaries, but the great thing about it is that the skills travel well. If you can’t get a job in life insurance, you’ll definitely get a job in the medical, health, or property and casualty insurance industries. And if not insurance, then there are growing opportunities in the financial services (banking, securities, commodities), data processing and computer services, health services, management consulting, and even in the Social Security Administration. Also, a lot of actuaries are opening up their own consulting practices. I think a lot of actuaries will agree that the worst part of the job is the exam process. We appreciate the need for it, and we like knowing how much of a raise we’ll get when we pass. But it’s a lot of studying and a lot of pressure.”

I Am the President of a Life Insurance and Financial Consulting Firm in Madison, Wisconsin “I have a communication arts degree in radio, television, and film. My father was in the radio business. Initially I thought I would either become a sportscaster or go into advertising sales because I always had a sales attitude. The majority of my time is spent reviewing clients’ positions, which I do daily. My business is split 70% in fixed annuities and life insurance and 30% in securities such as real estate investment trusts, mutual funds, stocks, and bonds.

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We have a batch of clients whose holdings require closer attention than most. I review their position, go see people, talk to them, so most of my time is spent working with clients, reviewing their financial situations and introducing them to new investment ideas they might want to try. We do some prospecting, but most of our new clients are referrals, which is a great testimonial to the satisfaction of our current clients. And this is the hard part: Once you get to a point when you don’t need any new clients, once you’re that successful, that’s when the clients start coming to you. I think it is important to have a college degree because it shows an employer you can establish a long-term goal, and this is what you will have to do for your clients. But when my firm is hiring a young person, we’re not necessarily concerned with your grade point average. We want to know if you attended college, if you graduated, but we’re more concerned about your interests and activities. You need something to be excited about in your life. People who are enthusiastic about some outside interest are a natural to work in this business and are bound to be successful in it. You can’t hurt yourself by getting a business degree, but it is obviously not necessary; I don’t have one. I can get a really good feel for who is going to like this work. This is truly the key: You have to like dealing with people, dealing with money, taking risks, and the thought of being your own boss. Be sure you want to work with people and help them. If it scares you to death to walk up to a stranger and introduce yourself, this is not the job for you. You definitely need social skills. And you need resilience because you will absolutely get knocked down a lot at first. But then you develop confidence and when you exude confidence, clients have confidence in you. If you can’t deal with ups and downs, don’t do it. I belong to the Million Dollar Roundtable, which represents the top 6% of all life insurance and annuity producers. You will want to aspire to belong to that group. What you will learn from them will make you extremely successful in this business. I’m heading to the annual conference soon. There will be 7,000 people there, half from the Pacific Rim. It’s a phenomenal organization. 19

The best part of my job is that I work with different people all the time, different personalities. I get to play a round of golf with a client, and that’s work! I enjoy helping people figure out where they’re going. What I don’t like is feeling bad when things go awry with investments. I always do my best, but I hate to disappoint. And dealing with corporate bureaucracy or dealing with large insurance companies is a nightmare. I would tell high school students that if they pursue this career for even six months, what they learn during that period will guarantee they will never have financial problems of their own in the future. If my business shut down tomorrow I would never have to worry about money. I know I could go anywhere and do something and succeed. That is a very powerful lesson.”

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PERSONAL QUALIFICATIONS YOU WILL NEED ALL LIFE INSURANCE PROFESSIONALS MUST ADHERE TO THE HIGHEST ETHICAL

standards at all times. Insurance professionals are entrusted with people’s livelihoods, families, and futures. All business dealings must be handled with the utmost integrity. Initiative, the ability to work independently, and motivation to succeed will take you far in this career. You should have leadership qualities and be able to take charge and make things happen. Analytical skills are important, as is computer savvy. You will have to deal with many others on a regular basis, including clients, claimants, and colleagues, so interpersonal and communications skills are necessary. This means being able to listen as well as express yourself orally and in writing. You should also enjoy helping others. Licensing and certification are required for many jobs, so you have to be willing to continue your education throughout your career. Actuaries must be particularly avid students who excel in math and computers. They have polished technical skills and probing minds, and enjoy solving sophisticated problems and playing strategy games. A head for business is also important.

Underwriting is a position of great

responsibility that calls for an inquisitive mind, self-discipline, a detail-oriented nature, and good judgment. Claims investigators must possess investigative skills and practice diplomacy. Sales representatives must be exceptionally self-motivated and confident, and their interpersonal skills must be of the highest order. Their very ability to make a living depends directly on their success in fostering and managing relationships with clients. Presentation, negotiating, and conflict-resolution skills are always needed in sales situations. Sales reps must also be adaptable and able to think quickly so they can offer creative life insurance and financial management alternatives on the spot to clients who do not accept their first ideas. It is also critical that they can explain complex financial and policy information in simple terms without appearing to condescend.

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ATTRACTIVE FEATURES DEPENDING UPON YOUR INCLINATIONS AND ASPIRATIONS, OCCUPATIONS IN LIFE

insurance can offer you an entrepreneurial adventure or a rock-solid career choice with job security and a steadily increasing income. On the entrepreneurial end of the spectrum are independent insurance agents. They are essentially small business owners, often home-based, with all the advantages and personal fulfillment that business ownership implies. They can keep their own hours – sleep in and work late if they are night owls, take time off to attend an opening game or child’s school play. As is true of virtually everyone who is self-employed, the independent agent’s earnings are directly related to the individual’s drive, initiative, expertise, determination, ingenuity, and ability. The more you put out, the more you will take in. You control your success; you steer your own career. Life insurance agents are respected professionals who generally enjoy strong ties with their communities and play a meaningful, positive role in their clients’ lives. It is a source of great satisfaction to know you are instrumental in protecting people from loss, achieving financial freedom, and making their dreams come true. You enjoy your clients’ trust and appreciation. Underwriters in particular make important decisions with far-reaching implications and impact. This work can be challenging and demanding, but being able to meet these challenges and demands is gratifying. If you are employed by one of the large life insurers, you will probably experience substantial support for your personal career development, including extensive training programs, all designed to help you realize your potential. Benefits can be generous – after all, insurance is one of the standard items in a compensation package! A career as an actuary brings another set of rewards. As an actuary, you enjoy the benefits and prestige of a professional title without having to go to graduate school. You are in charge of your career because advancement is based strictly on merit. How far and how fast you ascend the ladder of success is largely up to you. Actuaries possess many transferable skills. They enjoy learning, are goal-oriented and self-motivated, possess good business sense and problem solving abilities, and are high achievers. These are skills eagerly sought by employers, so it is not difficult to switch careers. 22

But you may not want to, ever. Career satisfaction is high and it is a well regarded profession in the perspectives of outsiders, as well. Actuarial work is consistently ranked in one of the top 10 places in respected occupations. The criteria in these surveys include employment outlook, environment, income, physical demands, security, and stress.

UNATTRACTIVE FEATURES INSURANCE COMPANIES ARE IN THE BUSINESS OF RISK, AND WHILE IT IS THEIR

purpose to identify and minimize risk, it can be a stressful atmosphere. If an underwriter is too conservative in risk assessment, the insurance carrier might lose business to rivals; too liberal, and the company might be forced to pay extravagant claims. Independent life insurance agents face all the headaches that business ownership implies. When you are an employee, you essentially get paid for just showing up (although you won’t be an employee for long if that’s all you ever do.) When you work for yourself, you earn money only when you perform. That often means little time off for the first couple years of your practice. You also don’t receive the benefits that go along with working for a corporation, and you have to perform all the paperwork and administrative tasks yourself, at least initially. Independent life insurance agents often work on a fee-based compensation system, which means they charge clients and also receive commissions from the insurance carrier whose policies they sell. Some industry observers believe fee-based compensation is not in the best interest of the client, so this practice is sometimes frowned upon. Insurance professionals often work long hours, and they may have to show up for appointments during evenings and weekends to accommodate clients’ schedules. They may also work outside of regular business hours to catch up on paperwork or track down a lead on a prospective new client. Underwriters in particular may be required to work longer hours due to corporate downsizing in the insurance business. Insurance investigators may experience resentment, hostility, or indignation from claimants who are anxious that the investigator’s interference may mean they will not get the cash they are counting on.

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EDUCATION AND TRAINING YOU WILL NEED THERE ARE MANY DIFFERENT SCHOOLING OPTIONS FROM WHICH TO CHOOSE IF

you are planning on a career in life insurance. Your degree may be in a subject as industry-specific as actuarial science or in a subject that simply lights the fires of your imagination. While a certain curriculum may be recommended to prepare for a particular career path in this industry, none of it is written in stone. By all means, study something that excites you. What you learn in school will be less meaningful or valuable to your success in this industry than what you learn on the job. All occupations in the life insurance field involve employer-supported training programs, continuing education, and professional designations. But don’t think this means you should write college off altogether; while it’s true you can get a job as a sales representative and even a highly paid actuary without a college diploma, those four years will teach you life lessons – like living independently and thinking for yourself – and foster relationships that will serve you for the rest of your life. Life insurance carriers and agencies sometimes prefer to hire salespeople who have studied finance, business administration, accounting, or marketing. But classes in economics, psychology, and sociology can also help sales reps understand the complicated relationship between people and their money. This can make them better salespeople, contributing meaningfully to the firm’s profits while helping clients meet their financial goals. If you are determined to acquire a degree in insurance, Culverhouse College of Commerce and Business Administration at the University of Alabama (www.cba.ua.edu) offers a major course of study in Insurance and Risk Management. Many MBA programs offer a concentration in insurance, and Florida State University (www.fsu.edu) even supports a doctoral concentration in the Department of Risk Management/Insurance. Internships are a way for a company to recruit and hire talent and can play an invaluable part in a sales agent’s development and training. Most large insurers offer them, and they are usually open to college juniors and seniors, graduate students, and students of two-year academic programs with substantial work experience. Be sure to check the requirements of the internships that interest you when you are a freshman or sophomore.

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MetLife’s sales internship program teaches participants about financial products and services, provides instruction on prospecting, selling and underwriting, and even pays for state life insurance licenses so interns can sell products. Interns work in a local sales office side-by-side with veteran financial services representatives who act as mentors. The time commitment is 20 hours a week and compensation is on a commission basis. Here is their Web site for more information: www.metlife.com Once you are hired, it is highly likely that your employer will provide not only in-house training but also some kind of tuition assistance for the pursuit of industry-related education outside the company. For instance, Minnesota Life (www.minnesotamutual.com/) pays all exam fees and study materials for programs offered by the Life Office Management Association, which confers a basic understanding of life insurance and life company operations; and the Chartered Life Underwriter/Chartered Financial Consultant program, which provides more detailed information about life insurance and sales. Professional designations Minnesota Life supports include Certified Financial Planner, Certified Pension Consultant, and Chartered Financial Analyst. To more completely embrace the role of comprehensive financial planner, many life insurance representatives and brokers are pursuing credentials that allow them to sell products like stocks, bonds, and mutual funds. The National Association of Securities Dealers administers an examination that qualifies salespeople as securities representatives. Actuaries spend so much of their careers studying for exams that it seems redundant to pursue the discipline in college. That said, the University of Iowa (www.stat.uiowa.edu/) offers actuarial science as a major course of study leading to a bachelor of science; so do two other univerisities: Indiana University Northwest Website: www.iun.edu/math/majoract.htm University of Central Florida Website: www.ucf.edu/catalog/current/UCF_Degree_Programs/dp_act.htm

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There are about 100 other colleges with similar programs. At some schools, the math or statistics departments allow students to declare a concentration in actuarial science. The Society of Actuaries features a listing of academic programs on its website at www.soa.org. Actuarial internships are similar in purpose and structure to those for sales representatives. New York Life Insurance Company’s internships combine actuarial classes with relevant work experience. Classroom topics include computers (Excel, APL programming, PTS computer modeling) and presentations from New York Life employees. Interns work alongside practicing actuaries on various projects, analyzing and solving problems and making decisions. There are summer and winter internships; in the summer, Fridays are half-days and all employees are permitted to don business casual dress – otherwise formal business attire is required. There is also a full-time actuarial trainee program. Here is their Web address: www.newyorklife.com/ The Society of Actuaries administers actuarial examinations for the life and health insurance industries, among others. The first several exams evaluate the test-taker’s proficiency in such branches of mathematics as calculus, probability, and statistics. They also serve as a self-assessment of the individual’s suitability for this career. Later exams cover subjects like pensions, individual life and annuities, investments, and finance. Prospective actuaries can begin the examination process while they are in college with the assistance of self-study guides. If they wait until they have a job, however, the support from their employer will be significant – the company will cover costs and fees related to the exam, give time off for study, provide review classes and study facilities, and throw parties for you when you pass. Employees who pass the exams advance to the associate level, generally within three to five years, and the fellowship level roughly three years after that. Liberty Mutual Group (www.libertymutual.com) seeks candidates for underwriting positions who possess a bachelor’s degree in economics, business administration, finance, math, insurance, or liberal arts (an extremely broad discipline that includes literature, languages, history, philosophy, and sciences); and for claims positions, the only requirement is a college diploma.

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For life insurance underwriters, continuing education is also necessary for advancement. They typically seek the Chartered Life Underwriter (CLU) designation. Additionally, the Academy of Life Underwriting is an organization that educates the home office underwriter with examinations, seminars, a Web site, and a journal. Many states rquire life insurance claims adjusters, appraisers, examiners, and investigators to be licensed. Licensure may also involve continuing education to keep abreast of court decisions, regulatory developments, and new drugs and medical procedures. In addition, examiners may choose to earn the Associate, Life and Health Claims or Fellow, Life and Health Claims designation from the International Claim Association.

WHAT YOU WILL EARN THE FINANCIAL REWARDS OF A CAREER IN LIFE INSURANCE CAN BE CONSIDERABLE,

and many employers – particularly large insurance carriers – offer a stunning array of benefits and perquisites (also known as perks). Insurance companies spend a lot of money, time, and effort recruiting and training the finest young people they can attract, and they have no intention of letting such an investment walk out the door. Actuarial and sales positions garner the highest earnings, and in both cases the salaries are hard-won. Salespeople’s incomes depend largely on commissions, the level of which directly reflects their abilities, work ethic, and drive. Actuaries’ incomes depend largely on how far they have advanced in the examination process, which also reflects their abilities, work ethic, and drive. One big difference is that actuaries who pass a certain exam may take comfort in the knowledge that they will soon be earning a certain salary; nobody who works on commissions from sales ever knows exactly what any given year’s income will be. The average entry level salary for an actuarial position at a life insurance carrier – depending on the size and location of the employer – is in the neighborhood of $45,000. According to a recent salary survey by D.W. Simpson & Company (www.dwsimpson.com), an actuarial recruiting firm, actuaries in the fields of life and health insurance who have achieved the associate designation from the Society of Actuaries receive a salary of up to $75,000 after two and a half years of employment, and over $200,000 after 14 years.

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Those who have received the fellowship designation make between $100,000 and $250,000-plus, depending on length of employment. Some employers award cash bonuses for the achievement of a professional designation. The median annual earnings for salaried life insurance agents are roughly $45,000. With commissions, a successful salesperson can expect to bring in $75,000 to $100,000 per year. Performance bonuses can add significantly to earnings. For life insurance underwriters, median annual earnings are approximately $45,000; but effective and experienced underwriting professionals can earn more than $80,000. Claims adjusters, examiners, and investigators employed by life insurance companies usually earn about $45,000, but salaries can exceed $75,000. The benefits offered by insurance companies can include generous tuition reimbursement, work/life balance support programs, lunchtime seminars on life management topics, subsidized recreational and social gatherings, unpaid leave, volunteer and community support programs, matching gift programs, retirement and pension plans, profit sharing, long-term and short-term disability coverage, various health and medical care options, up to five weeks’ paid vacation per year, and more.

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OUTLOOK FOR THIS CAREER LIFE IN SUR ANCE IS RE CES SION RESISTANT – IN THE ABSENCE OF A

cataclysmic economic depression, it is considered a necessity rather than a discretionary purchase. This industry is much less affected by economic conditions than others are. But in all cases, a broad knowledge of insurance will ensure your chances of sustained employment, since you can take your skills and knowledge elsewhere. According to the Web site of the Wharton Business School at the University of Pennsylvania, which offers an MBA in insurance and risk management and actuarial sciences, “The growth in the number of firms providing personal financial planning has increased the demand for persons with education in the use of life insurance and related mechanisms in capital accumulation and estate conservation.” Insurance sales agents and brokers who are qualified to sell annuities, securities, and other financial products will be in the best position to succeed. Of course, traditional securities brokers and bankers will pose a competitive threat in this area. In an effort to control costs, many insurers are trimming their sales staffs and relying instead on independent agents. Meanwhile, the typical independent agency is offering more and more opportunities for young people to hold management positions and even achieve part ownership in the business. Although consumers are turning to the Internet to find out about life insurance and related items, they will still want to sit down with a living, breathing human being before they buy anything. Savvy agents will not be threatened by technology but rather will use the Internet to market their services and reach potential clients. Underwriting is a stable profession and even less vulnerable to economic downturns than other positions in the life insurance industry. Despite computer software that makes the underwriter’s job easier, declines in employment rates are not anticipated. The same is true for claims adjusters, appraisers, examiners, and investigators. Actuaries will always be in demand, if not necessarily in the life insurance field. If the job openings in life insurance have declined when you begin looking for work, you can find a job in health, property, or casualty insurance; management consulting; public relations; securities and commodities; the government; information technology; or academia. 29

GETTING STARTED WHILE YOU’RE STILL IN COLLEGE, ASK YOUR CAREER-PLANNING COUNSELOR TO

help you locate one of the many internships offered by major life insurance carriers. Internships present tremendous opportunities on many levels. The experience will be invaluable, whether you decide to go into this field or not. It will make you an attractive candidate for a full-time position; indeed, recruitment is the primary purpose of the internship programs in this industry. It will be fun – many are headquartered in the nation’s most exciting cities and insurance companies consider recreation and social activity an important agenda item. And most internships are paying positions. If you don’t go to work for the company you interned for, or if you don’t intern, it’s easy enough to get in touch with life insurance companies. Just locate their Web addresses at your local library, or use a search engine to access their Web sites. Most of them have a careers link that tells you about job openings, trainee programs, and application procedures. Whether you embody the entrepreneurial spirit or crave job security, if you enjoy learning and helping others, would like to be part of a respected profession with the highest ethical standards, and don’t mind the occasional challenge, consider a career in life insurance. Good luck!

ASSOCIATIONS AND ORGANIZATIONS n Academy of Life Underwriting www.alu-web.org n American Academy of Actuaries www.actuary.org/ n American Council of Life Insurance www.acli.com n BeAnActuary.org www.actuary.org/index.htm n Financial Planning Association www.fpanet.org 30

n Independent Insurance Agents and Brokers of America www.iiaa.org n Insurance Information Institute www.iii.org n Insurance Vocational Education Student Training (InVEST) www.investprogram.org/ n International Claim Association www.claim.org n Life and Health Insurance Foundation for Education www.life-line.org n Life Insurance Marketing & Research Association International www.limra.com/ n Life Insurers Council www.loma.org/IndexPage-LIC .asp n Life Office Management Association www.loma.org/ n Life Underwriter Training Council www.lutc.org/ n Million Dollar Round Table www.mdrt.org/ n National Alliance for Insurance Education and Research www.scic.com/ n National Association of Insurance and Financial Advisors www.naifa.org/sh_index.html n National Association of Life Underwriters National Association of Securities Dealers www.nasd.com/ n Professional Insurance Agents www.piaonline.org/

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n Registered Professional Adjusters www.rpa-adjuster.com/ n Society of Actuaries www.soa.org

PERIODICALS n Contingencies www.contingencies.org/ n Journal of Financial planning www.fpanet.org/journal n On the Risk www.alu-web.org/otr/index.htm n PIA Magazine www.piaonline.org/publications.shtml n The Actuary www.soa.org/bookstore/actuary.html n The Future Actuary www.soa.org

COYRIGHT 2007 Institute For Career Research CHICAGO CAREERS INTERNET DATABASE www.careers-internet.org

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