Is Primerica a Pyramid Scheme?

An in-depth review from a past Primerica agent.
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Overview

*Note: the below article was submitted by an ex-Primerica agent. The views expressed by this agent are not necessarily the views of Insurist.

Primerica Life Insurance Company is a life insurance company based in Duluth, Georgia that focuses on multi-level marketing to further build their market share and their workforce. With a focus on level term life insurance, Primerica targets middle-class families as their main demographic and attempts to not only sell insurance but also to recruit them to be sales agents as well.

primerica insuranceTrue to MLM form, it isn’t the person who sells the most policies, but the person who recruits the most people to sell Primerica products, who becomes the most successful among other Primerica agents.

As a “Buy Term Invest The Difference” type of company, Primerica only sells term life insurance and actively campaigns against other types of permanent policies like universal life and whole life insurance. While the Primerica term life insurance product is not a horrible product, it is often the pricing of the term life insurance and the way in which it is sold draws much of the negative attention you see in the professional insurance world.

Primerica does offer other products, most of which are repackaged services from other vendors, which include investments and pre-paid legal services which are part of their marketing and sales processes.

Pro

A financially strong life insurance company that offers an array of products designed for the middle class. Underwriting standards are best for those in perfect health with no significant health histories.

Cons

Term life insurance product is 11% – 29% more expensive than industry averages, isn’t convertible to a whole life policy, and isn’t recommended for people with past health and financial issues.

Warning

Most agents for Primerica are minimally trained in matters of life insurance and estate planning. The training provided focuses more on sales and emotional buying with an intense focus on selling to family and friends.

Primerica’s term life insurance is a financially sound product; however, it is up to 29% more expensive when compared to other term life insurance products and Primerica’s underwriting standard is not usually beneficial for people with less than perfect health histories. It is best to talk with an independent agent to obtain quotes from other companies before making your life insurance purchase.

What Products And Services Does Primerica Offer?

Financial Needs Analysis:

The Financial Needs Analysis (FNA) is a 100% purely marketing tool used by Primerica and other companies like State Farm and Country Financial to show “gaps” in your insurance coverage and investment plan to help the agents begin to find areas to sell you their products. In most cases, these types of presentations are called by different names and are full of pretty graphics, but in the end, are simply marketing tools used to give the sales agent more perceived credibility and “value” in the eyes of the prospect.

Regardless of the company, if any person who works on commission-based sales provides this type of product for “free”, it is important to be skeptical and not base your buying decision based solely on that information.

Term Life Insurance:

Primerica does have a strong term life insurance product and is a financially strong company, however, Primerica’s cost for a simple term life insurance policy is up to 29% more expensive than the industry average for the same product.

Based on the information provided back in 2006, Primerica’s term life insurance policy was one of the only policies at the time that didn’t have policy exclusions for “war or acts of war/terrorism” deaths and they were one of the few companies that paid out all their claims for victims of 9/11. However, there appears there has been a shift in overall customer sentiment and an increase in regulatory complaints by customers to the National Association of Insurance Commissioners, the insurance regulatory body.

Most of the customer concerns being voiced is largely around the service and claims aspect of the Primerica operations of the life insurance product, however, the marketing and sales area does draw some complaints as well. This would also explain why Primerica falls so low on the J.D. Power Customer Satisfaction Life Insurance Study and why more customers are taking to the internet and the BBB to air out issues with the company.

Another issue voiced is that Primerica doesn’t provide online quoting of term life insurance premiums, preventing the customer from being able to compare quotes for coverage in line with other life insurance companies offering the same product. To get a quote, the customer must engage in the sales process of a Primerica agent before being able to consider which term life insurance policy to buy.

While the term life insurance product is a good product; the pricing, support, and claims payout out tend to be more of the negative aspect surrounding this company.

Insurist Recommends:

Run a quote from multiple insurance companies before talking to a Primerica agent.

Doing this first will allow you to have all the information in front of you before you make your decision on which policy to purchase.

Investments

primerica insurance best life insurancePrimerica’s investment sales division (PFS Investments Inc. dba Primerica Advisors) operates everything investment and annuities related on that side of the house. In this setup, Primerica holds nothing proprietary and is simply a broker for larger mutual funds and insurance companies.

The quality of mutual funds offered is similar to what you can get from anywhere else, as they represent big names in the field like American Funds, Fidelity, and OppenheimerFunds. There is nothing overly distinguishing about this side of the Primerica business that sets it apart from other competitors offering the same products.

Auto & Homeowners Insurance

Primerica’s Property & Casualty insurance sales (auto and homeowners insurance), called Primerica Secure, is a referral service to Answer Financial and operates as a lead generation company for that company. Primerica agents will get a small cut from business sent to Answer Financial. Answer Financial is an Allstate-owned subsidiary.

Long Term Care Insurance

long term care primaerica best life insuranceWhat was once considered a huge moneymaker for the insurance industry has slowly become obsolete as time goes on, but Primerica does still broker this product for Genworth Financial. While not the largest moneymaker for the company, it does provide agents an additional product to sell to prospects, and is the product is backed by a financially strong insurance company.

It is important to note that Long Term Care policies are extremely expensive and become more expensive if you wish to have the benefits increase with inflation. Also, these policies have premiums that are not level, or where the price is locked, allowing for the premium to increase as time goes on.

Long Term Care riders to life insurance policies have become a more popular option for those seeking some level of LTC coverage; however, we recommend looking at companies like American National and Phoenix Life that have strong living benefits options that come standard with their life insurance policies. This option helps save you money in the long run by utilizing accelerated benefits that come attached to the policy when purchased.

Primerica Debtwatchers™

As one of their newer products, Primerica has teamed up with Equifax to provide an online tool that helps you analyze your debt and provide strategies to help pay down that debt. Focused largely on debt stacking (aka “snowballing”), this program uses your Equifax credit report to build a plan to help you pay down debt quickly.

Online reports show that this service is billed at $14.95 per month (information may not be up to date) and it mimics other services already out there. For example, Credit Karma offers a credit report monitoring service and Mint (the sister product of Quickbooks) offers credit monitoring, money management, and advisory software.

Both solutions are free.

Primerica Legal Protection Program (Pre-Paid Legal Services/ LegalShield)

primerica best life insurancePrimerica offers Pre-Paid Legal Services’ main product to their customers as well. Pre-Paid Legal/ LegalShield is a company that offers basic level legal services as a monthly subscription and a discount for attorney’s inside their network. This affiliation between the two companies is one of the oldest partnerships inside the Primerica menu of products and is fairly popular.

While there are large amounts of controversy concerning Pre-Paid Legal / LegalShield methods of doing business on the internet and with the BBB, these services do remain popular with some of their dedicated sales agents and some customers.

ID Theft Defense

Another product offered by the aforementioned Pre-Paid Legal Services company, ID Theft Defense is a product similar in nature to LifeLock or one of the countless identity monitoring services out there. In some cases, banks have been offering this type of service to their clients for free or at reduced rates.

Primerica’s Sales Strategy

Demographic:

Primerica offers a variety of products that are focused on the average middle-class consumer who usually carries a fairly large debt load and is undereducated in financial matters. Primerica’s sales training is focused on exploiting this lack of education and targeting the demographic with one-sided insurance presentations and deep calls to emotional buying (e.g. “Don’t you want your family to be secure if you die?” or “So, you are saying you aren’t interested in protecting your family’s financial future?”). The main focus for a new Primerica agent is to sell the product to their friends and family in hopes to capitalize on that emotional relationship between them and using that bond to further the market share.

Primerica Agents:

One of the biggest concerns people have with Primerica surrounds the quality of agents and their level of training.

primerica best life insuranceThe majority of the Primerica sales force is part-time, meaning that they treat this endeavor as one would treat pet sitting or bar-tending, which causes issues in overall quality. The insurance and investments industry is a constantly evolving environment and requires there to be significant focus on being up to date with some of these changes. For example, the Fiduciary Rule is a key issue that has a large impact on the sales of investments and if the agent isn’t properly trained and involved in the changes of regulations, that agent stands to possibly, and unintentionally, harm a client.

When I joined Primerica originally, back in 2006, there was almost no training provided on insurance topics outside of the basic licensing class. The weekly meetings they hold are not insurance-related informational meetings as much as traditional sales meetings that focus on the typical sales strategies you see in the insurance industry.
Because of this, agents begin selling a product they are largely unfamiliar with, and in some cases, misrepresentation of the product occurs due to this lack of knowledge.

Are all Primerica agents this way? No, not at all. However, the lack of a dedicated salesforce and the high level of agent attrition doesn’t help ensure quality when it comes to the face-to-face service need of a life insurance policy if the situation presents itself.

Recruitment:

There is more focus on recruiting other people to be agents than actually creating and training higher-quality agents. This pressure is extremely common in a multi-level marketing structure, which is how Primerica operates.

Very few people stay inside the Primerica structure on the lower level, preferring to service clients and focus on sales. This is largely due to the low amount of commission received for a sale vs. an “override”, or cut of the commission, of someone that signed up under the agent. Because of this setup, many serious insurance professionals move on to different life insurance companies in order to expand their education and practice. This means that the customer is often left “orphaned”, without an agent to meet face to face with for future needs.

Nothing But Term Life Insurance:

Not only does Primerica solely provide term life insurance, but agents are also trained that anything other than term life insurance is bad. They believe this so strongly that they can become extremely hostile about this topic.

Primerica, in the training and philosophy, doesn’t properly educate agents on the proper application of permanent life insurance for estate planning and how they can benefit customers. Instead, agents are repeatedly told that only term life insurance works for everyone, which isn’t always the case.

(Writer’s note: A level term life insurance policy is more than sufficient for about 85%-90% of the people I work with. However, there are times where other permanent options may make more sense and depend largely on the needs of the customer. No single insurance product is the “best life insurance” for everyone.)

What If I Have A Health Condition?

Primerica’s underwriting standard is not favorable to those with less than perfect health. This means that those who are looking for life insurance but have a medical history of cancer, diabetes, or depression will not get the best rate on their life insurance coverage. Customers who aren’t educated in life insurance with conditions like these, or worse, may have their applications denied.

If a denial of an application happens, seeking another policy elsewhere with another company is jeopardized. This is a fact that Primerica agents are trained on and can potentially cause more harm than good when it comes to the customer trying to obtain life insurance in the future.

It is always recommended to discuss life insurance with an independent life insurance agent that works with many companies. Each company has its own different underwriting requirements and independent agents know which company is best suited for each individual’s situation.

Why Does Primerica Have A Bad Reputation?

As discussed before, much of Primerica’s issues don’t come from the term life insurance product, as much as it does from the sales process and operations of the company. Combine that with the pushy recruitment methods used on prospects and customers to join their MLM structure, many people become quickly turned off to the company.

Professionals speak out against Primerica’s tactics when it comes to their “buy term, invest the difference” hard stance, saying that it is short-sighted and not always the best fit for every customer. While many insurance professionals aren’t opposed to the idea of term life insurance (many are advocates of it), complaints exist due to the manner in which Primerica agents spread inaccurate information and accuse other insurance professionals of being “scammers” if they suggest any type of coverage other than term during a financial review.

Ironically, the negative reputation Primerica carries is less about their term life insurance as much as it is about the way the company operates in general.

Is Primerica A Scam?

While their methods are unconventional and may be considered unprofessional by others in the insurance world, Primerica is not a scam. Is it a “pyramid scheme” (as many call MLM structures)? Yes. Primerica is the Amway or LuLaRoe of financial services, but it doesn’t mean to say that it is a scam.

Primerica is a publicly traded company and has been in the life insurance industry for over 40 years which makes them a well established member in the life insurance community.

Insurist Recommends

When dealing with a Primerica agent, we encourage you to remember the following:

  • Don’t get sucked into the emotional aspect of their (or anyone’s) sales tactics and presentations. Insurance agents who do face-to-face sales are trained to exploit the emotional aspect of buying.
  • Generally speaking, term life insurance is simple and straightforward. A term life insurance policy from one company will look almost identical to another, with the exception of the accelerated death benefits and riders.
  • Get life insurance quotes from Insurist before you sit down with a Primerica agent in order to properly compare prices.
  • Primerica term life insurance policies do not convert to a whole life policy.
  • Primerica life insurance prices are typically 11%-29% higher than the average cost for a term life insurance policy.
  • Primerica agents are typically recruited with very minimal training on matters of life insurance and estate planning. We DO NOT recommend you relying on their advice for more advanced life insurance needs.
  • If you have less than perfect health or financial history, Primerica maybe even more expensive than other competitors on the market.

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About the author
Luke Kinton
Luke Kinton
Licensed Insurance Agent
A licensed insurance producer in life/health/property/casualty, Luke also has FINRA Registered Series 6 and 63 certifications. As a Six Sigma Green Belt and Certified Market Research Associate, he takes user content to a new level of professionalism.