Lessons from Primerica Canada’s independent sales force

Mississauga-based insurer Primerica Canada marked a recent milestone when it hit 10,000 independent agents, reflecting a business model that has brought them both success and criticism.

The company hires mostly contract workers, and that’s helped it expand across Canada, drive growth to $95 billion in insurance coverage and cut payroll charges and other workplace costs – everything from pensions and health benefits to workers’ compensation.

Small- and medium-sized companies looking for ways to save money often contract out jobs – the IT sector is well known for this.

But such a system is not without flaws.

Hugh Gunz, a University of Toronto Mississauga management professor, said using independent contracts is a trend that’s been around for decades. “Most things in management tend to go in cycles,” he said.

At Primerica Canada, president and chief marketing officer Jeff Dumanski told YourMississaugaBiz.com “a lot of our strategy is built on the size of the part-time sales force.”

For a large majority of people who want to become Primerica agents, that means they can still keep other full-time jobs and earn extra money on the side. About 70 per cent of the U.S.-owned financial company’s Canadian workers are part-time independent contractors.

Only one-in-five agents make the switch to full-time work selling term life insurance meaning that most customers are not getting the value of a full-time employee who would have far greater knowledge of and experience with the company.

The sales model is based on selling to friends, family, colleagues and acquaintances, a potentially untapped market that is easier for agents to access. And while Dumanski says an agent can make $250 for selling a policy, he also acknowledged that there are penalties for “parking” a license, lack of activity and some agents can actually lose money due to compulsory fees like renewal and error insurance. “Not everybody sells in any given month,” he said.

Primerica Canada’s captive distribution model means representatives are limited to the company’s products and services. There are a lot of things agents can offer, including mutual and segregated funds, as well as referral products like debt consolidation, prepaid legal, health and dental insurance.

However, agents aren’t able able to shop the marketplace in order to provide their clients with the best possible value. The company’s use of the multi-level marketing structure has also been criticized for driving up the price of its insurance and mutual fund products.

The company makes an effort to reach out and recruit people not normally found in the industry, making their hiring base more inclusive of individuals who speak English as a second language and ethnic minorities. The loose recruitment standards, however, does not give Primerica a strong, consistent work force. Dumanski said that while each year the company recruits an estimated 20,000 people, only 2,000 become licensed and up to 1,200 of them stop practicing.

Gunz cautioned that companies considering this business model should think about what they’re giving up in return for lower payroll costs.

“Everyone thinks it’s a wonderful thing to do. Then they realize perhaps it’s not such a great thing because you haven’t got quite the kind of control you might otherwise want to have.”

Primerica Canada was established in 1986. The company is headquartered in northern Mississauga on Argentia Road, where it employs 200 people.

Its parent life insurance company is based in Georgia and was once part of the Citigroup global banking giant.

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