The Limits of the Market for Ordinary Life Insurance

Abstract

ix YEARS ago the Temporary National Economic Committee (TNEC) investigated the life insurance business and reached this conclusion regarding life insurance marketing: Obviously, the absence of concrete information prevents (life insurance) companies from taking forthright steps in the solution of their sales problems. This is a rather interesting observation, but a final judgement in the matter is possible only with knowledge of the available information and the market needs of life insurance selling. That is what this article proposes, tentatively, to examine. The discussion will be limited to the market for ordinary life insurance as differentiated from group and industrial life insurance. Aspects of the agency system of life insurance selling which particularly concerned the TNEC were the training and compensation of agents, together with the persistency of life insurance policies. The TNEC noted a tendency toward inadequate agent training and low compensation, resulting in a high turnover of agents. The high turn-over of agents left many policyholders unserviced, with the consequence of unnecessary life insurance lapses. Since I940, the compensation of agents has risen markedly; turn-over during the past two years has been reduced so greatly that it is lower than in most other employments; and the lapsing of life insurance policies is presently at a phenomenally low level. These great improvements are, at least in some measure, due to the unusual circumstances