Although the insurance sector has taken some big steps in the past decade in replacing its aging workforce, a recent report shows that firms are having difficulty retaining insurance agents.

The latest numbers from Connecticut-based LIMRA Inter-national Inc. , a consultant to the global life insurance sector, show a one-year drop in retention rates among Canadian life insurance companies that retain proprietary career sales forces.

According to the LIMRA report, enti-tled Canadian Salesforce and Retention, 2009, the four-year retention rate for captive agents joining Canadian firms dropped to 31% in 2009 from 34% in 2008. In other words, after four years of service, only 738 of the 2,410 agents that were hired in 2006 were still under contract.

Says Margaret Honan, LIMRA’s head researcher on recruiting and retention trends and author of the report: “Perhaps companies were ‘cleaning house,’ terminating producers not meeting minimum production requirements, or companies started enforcing production levels.”

The retention rates in the study range from 91% to just 6%, with the median at 25%. Among the 10 firms surveyed were Desjardins Financial Security, Great-West Life Assurance Co., Industrial Alliance Insurance and Financial Services Inc., RBC Insurance Inc. and Sun Life Financial Inc.

The four-year retention rate is important because the rate drops to about 5% after that length of time. After four years, captive agents often have figured out how to win clients and are earning enough in renewals, commissions and trailers to make a living in the fifth year. About 57% of insurance advisors have been around for four years or more.

The LIMRA report doesn’t say where the agents go after leaving the captive sales force, but, Honan says, they may be leaving for good or they could be joining Mutual Fund Dealers Association of Canada firms or Investment Industry Regulatory Organization of Canada firms — or some may be going it alone, joining one or more managing general agencies.

LIMRA, an acronym for Life Insurance and Market Research Association, does track the independent sales force through a survey of a small number of Canadian MGAs. But, effectively, the career sales force numbers tell the clearest story about the entire insurance sector; 99% of all new advisors enter the sector through the captive channel and move into the independent channel later.

The 2009 turnover rate was 16%. That means, of the 14,860 captive agents who started the year, 2,365 were terminated. That number is about average since 2006.

On the positive side, while the year-to-year retention number is down, Honan says, long-term retention rates are up from 2003, when retention was at 27%. The sector is now recruiting more agents to account for attrition, recruiting 24 new agents for every 100 in 2009, compared with 21 the year before.

Byren Innes, senior vice president and principal with NewLink Group Inc. , a Toronto-based insurance consultancy, says the recession could have been a factor in the lower 2009 retention rates. He says the LIMRA report doesn’t say whether the agents’ average sales performance dropped during the year, or if the insurers raised their minimum production levels to cut expenses.

“You don’t know what the cause and effect is,” Innes says, adding that the sector is still covering only attrition for the most part.

Relatively speaking, he adds, the numbers are a big improvement over U.S. retention rates, which have dropped into the teens.

“It’s still not where people would like it to be,” Innes says, “because when you have a 16% turnover rate, you have only one-third of agents getting past the four-year mark. To grow, you have to recruit a lot of bodies every year.”

Innes points out that with a 16% turnover rate, the sector would have to hire 2,300 new agents every year just to stay even.

Career agencies have improved their screening methods for new recruits, he says, but it is still expensive for them to develop successful agents. While it might please the agencies that some of their recruits have defected to MGAs through which they still file business to the agencies as independents, the agencies still have to build their career sales forces.

On the independent side, the situation is tougher, Innes says, and both the insurance agencies and the MGAs are concerned.

Predictably, recruits with prior insurance sales experience do better. Almost 70% of those without prior experience are fired after two years. Among those who have sold insurance before, four-year retention is at 46%, vs 24% for the inexperienced.

Also, eight insurers reported data on sales force gender. The LIMRA report says that for every 100 agents under contract, insurers hire 28 women and 20 men at the start of every year. The men tend to stick around at a slightly higher rate than the women, with an average retention rate of 33% for men and 30% for women. IE