Massachusetts Mutual Life Insurance Co. said Thursday that it is negotiating an acquisition that would nearly double its sales force of agents, a move that analysts said could help the Springfield company grow both its core life insurance business and the retirement and other financial products it offers.
MassMutual confirmed talks with MetLife Inc. to buy the New York-based insurer’s US retail adviser group, which includes a sales force of about 4,000 agents. MassMutual now has about 5,600 agents. Both companies said there is no timetable for concluding a deal.
“There can be no assurance that an agreement will be reached or that a transaction will be consummated,” MetLife said in a statement.
MassMutual is one of the nation’s biggest insurance firms, a Fortune 100 company with more than $250 billion in assets. MassMutual employs more than 7,000 people in the Springfield area, including in neighboring Connecticut.
Even though customers for auto and property insurance are increasingly moving online, agents still play an important role in selling life insurance, analysts said. Life insurance is complicated, and optional, unlike auto or property coverage, and it deals with a topic many people don’t want to think about.
Agents are necessary not only to explain the product, analysts say, but to convey the need for it and act as a trusted adviser.
Acquiring experienced agents is a cost-effective way for MassMutual to grow since it can take years for agents to establish themselves in a market and get enough referrals to earn significant commission, analysts said. Only about 20 percent of new hires stick with the life insurance business for more than five years, according to industry estimates.
MetLife has been shrinking its business to avoid increased government oversight of the largest financial services companies — the so-called too-big-to-fail firms — that followed the 2008 financial crisis. Other life insurers have over the years shifted from in-house agents to independent advisers, who may also sell other companies products.
Proposals to further tighten financial industry regulations could lead to fewer companies offering financial advisory services and fewer people willing to become insurance agents and financial advisers, said Robert Kerzner, president of Limra, a research group for the financial services industry in Windsor, Conn.
Coming as the number of people entering retirement climbs, this trend could benefit companies such as MassMutual, with large sales forces to direct customers to financial products and planning services, Kerzner said. By 2040, there will be 82 million retirees in the United States.
“The largest number of people and the largest sums of dollars are migrating from preretirement to retirement in history,” Kerzner said.
If the deal with MetLife is completed, MassMutual stands to gain thousands of agents who could introduce their MetLife clients to MassMutual products and services, analysts said. But merging the different cultures of the companies could be a challenge for MassMutual, said Doug Bennett, a life insurance consultant in Jacksonville, Fla.
Life insurance is an emotional business because agents are selling a product that buyers are never going to use, which will only benefit their dependents upon their deaths. Rejection rates for agents are high.
“It’s not always dollars and cents,” he said. “There’s a lot of ego involved in this business.”
The talks between MassMutual and MetLife were first reported by the Wall Street Journal.Katie Johnston can be reached at firstname.lastname@example.org. Follow her on Twitter @ktkjohnston. Deirdre Fernandes can be reached at email@example.com. Follow her on Twitter @fernandesglobe.