Life insurance agents, just like some types of lawyers, can sometimes get a bad wrap. That's because some agents fulfil the agent stereotype in the way they treat potential and actual clients. So, how can you spot the bad ones? There are generally three tell-tale signs that your life insurance agent is looking for a commission, not a client:
1. Department of Labor Ruling
The US Department of Labor has, in recent months, indicated its intention to impose new fiduciary duties on an expanded class of financial advisors and life insurance agents. Nearly half of life agents do not currently impose fiduciary duties on themselves when marketing and recommending insurance products to potential clients. Why is this important? Because the life agents will no longer be able to recommend high-commission products to potential clients unless they are truly in the client's best interest for their financial circumstances. That means pushing a variable annuity product to someone it's not a good choice for could result in liability to the life agent for a breach of his/her fiduciary duty to the client. Anyone complaining about this new fiduciary standard should stick out like a sore thumb.
2. One-Size-Fits-All Agents
I don't care who you are. Some insurance products are not good for everyone. However, there are agents who will always push whole life insurance, or variable annuities, for EVERYONE, regardless of their age or financial situation. If you're 25 and your agent is telling you to purchase a whole life policy instead of term, he's most likely a bad agent. Why would they push these sorts of products? Because they pay big commissions to the agent. Same with long-term care insurance. There's no such thing as the perfect insurance product for every situation. If your agent is pushing the same products for both you and your parents, he's a bad agent.
3. Constant Up-Sells
Most life insurance agents get paid on commission based on the policies they sell. This means that agents are most likely to focus their business on volume or cost in order to maximize their commissions. High volume means more commissions, high cost means larger commissions. So, if you think about it, agents are incentivized to sell more or higher priced policies to increase their commissions. If your agent is constantly contacting you about "revisiting your term policy" or "adding on a universal policy" every year, or more often, your agent is worried about his commission, not his client.
Paul A. Yokabitus