Tuesday, June 30, 2015

2014 Pass Rates on Licensing Exams


CFS conducts an annual survey of states to determine the first-time pass rate on various insurance agent licensing exams.  The chart below shows pass rates for Calendar Year 2014 on Life Agent licensing tests.  The results are color coded by the exam vendor each state uses: Blue for Pearson; Red for PSI Exams; Green for Prometric and Yellow for other.


As the chart illustrates, the pass rates are all over the map.  They suggest one’s ease of entry into the life insurance profession depends in part on where one lives.   For example, it is not clear why only 4 in 10 Indianans get a license on their first shot, when in Michigan, 7 in 10 do.  Are people in Michigan smarter?  Or are regulations in Indiana making entry into the profession more difficult?  If so, is there a good public policy reason why? 

One of this organization’s goals is promote policies that help to ensure every community has access to financial tools and advice – including agents who represent a vital link to products like life insurance.  In pursuit of that goal, CFS has looked at the licensing process and tried to shine a light on unfair barriers to entry that might be preventing some from getting a license.  While licensing is important and meant to protect consumers, consumers are not protected if the pool of professionals on which they can rely is artificially limited.

CFS has found that pass rate on a state’s licensing exam is good proxy for licensing fairness.  While the organization looks at pass rates for many professions, the life agent pass rates are particularly useful, as the laws governing a life agent are consistent across states. 


This is an important consumer issue.  LIMRA’s 2010 survey of the life market found that “almost eight in 10 U.S. households currently do not have a personal life insurance agent or broker to turn to and most of them say they never did.”  Among Hispanic and working class households, the lack of reported contact with an agent was even higher.

With life insurance usage so low, and Americans searching for individuals to talk to, public policy makers owe it to their constituents to ensure that qualified individuals seeking to work in the profession can get a license without unnecessary regulatory hurdles. 

Source documents for this survey will be provided to any one upon request.  

Friday, June 26, 2015

Auto-Enrollment

The WSJ covers an EBRI analysis of auto-enrollment policies and whether such policies are enough to solve the retirement crisis.  The answer?  Not really.  Not if the auto savings rate is 3%.

Key point:
EBRI, a nonpartisan think tank, modeled savings behavior by age group and employer size and found that an automatic 3% deduction without the possibility of opting out would reduce the total retirement savings shortfall for households headed by someone ages 35 to 64 by 6.5%, from $4.13 trillion to $3.86 trillion.