Is Your Insurance Agency a Pyramid Scheme? 6 Warning Signs

If you are thinking about selling insurance, you must have attended meetings around your block. But these meetings were always so focused on cars, expensive vacations, and a luxurious lifestyle. You start to rethink your decision and wonder if this is a legit insurance agency or just another multi-level marketing pyramid scheme. In this article, we’ll help you distinguish an insurance agency from a pyramid scheme; we’ll discuss some red flags to look out for and what to expect. With these six signs listed in this article, you can quickly tell if an insurance agency is trying to help you make sales or make you recruit everyone around you. 

What is a Multi-Level Marketing Pyramid Scheme?

This is popularly known as a pyramid scheme or MLM, it is illegal by law, but people still dabble into them for whatever reason they have. Most of these pyramid schemes only talk about money, recruitment, lavish lifestyle, and more. There is little to no discussion about the business’s actual value, pieces of training are ignored, and the art of selling is preached anyhow, without a strategy. They usually have a charismatic leader, the head of the flock, this person is persuasive, and people in the insurance agency love him. 

Do Insurance Sales Organizations Have Multi-Level Marketing Structures?

We can argue that many organizations operate in a multi-level marketing structure. In the insurance business, there are multiple tiers in the system. Business executives are usually at the top; the agents are at the bottom then anything else finds a way around both. In a well-structured agency, training and the opportunity for growth are seen in between. 

However, this hierarchy is not a disruptive issue, as what matters is the company’s culture and a clear career path for agents that want to move upwards. After all, most organizations in other industries have a tier system. 

Some warning signs to look out for in Pyramid Schemes

Focus on recruitment and not production

As an agent, learning the art of selling should be your ultimate goal at first. Everything else can come after that. You need to practice the skill and make it your craft to help your business lay an easy foundation. If you have plans to start an agency in the future, you’ll be credible because you know sales and understand the business model. But you wouldn’t want to create an agency immediately without any experience to hold on to. 

However, the major problem with this pyramid scheme is that they focus on recruitment a lot. Nobody cares that you have no experience; they keep pushing you to recruit more members to join your circle. They only care about your network, people that you know. They want them selling insurance or you selling to them. This process goes on and on, in cycles. 

Blatant Evident Consumption 

If you happen to attend a meeting where the leader or speaker starts with an outrageous gesture, then you need to watch out for those. For example, the speaker flashes a bulk of cash to motivate people or passes his expensive watch around so that everyone sees the lavish life MLM promises – hilarious right? People still fall for these old tricks, though. This is usually an illusion, like a magic display, to entice the audience, but the real tricksters are aware that it is merely a performance. Don’t forget that these tricks are easily replicated; you can rent expensive sports cars and show them off at meetings to make your act seem believable. Be smart and don’t fall for this pitch strategy; the primary aim is to lure you into signing up. They don’t care about anything else. 

Noisy Revival Moves

Have you ever walked into an organization, and all you see and hear is jumping and some weird cultic chants? This is a typical pyramid scheme/MLM. They are so focused on the physical noise and boost that comes with all the attention-seeking gimmicks. Nobody cares for mental stimulation and thought-provoking conversation. They focus on push-ups, hollering, repeated chants, jumping jacks, and more performance-driven tricks. Remember that motivational speech is not the same as a skill development lecture. 

Imaginary Ladder 

Everyone wants to feel appreciated and also a sense of belonging. An excellent pyramid scheme finds a way to make its members feel this way. They set up an arbitrary ladder; this is a pure business move because, in reality, this ladder is useless and serves no purpose. Implementing a simple ladder system with benefits is not a bad idea, but pyramid schemes/MLMs only use the ladder system to fulfill human recognition. They do this so that members are valued for the time and effort spent. They splash a fancy title to your name but hold out on necessary commissions. Always ensure a genuine clear career part in that organization before total commitment to the role.

Inner circle codes

Most of these pyramid schemes have their language; this is a way to separate them from the outside world and make their members feel special. The in-group language is learned, sometimes unconsciously. This is a cult thing, speaking with codes and ways that only inner members can understand- who wants to be a part of that? The reality is that this is a way for senior members to show off, make juniors feel excluded, and encourage them to work harder to reach the top; this is a mere trap. Humans always want to feel included, so it’s easy to fall for this.

Charismatic Leader

It is okay for reputable organizations to have leaders for people to look up to. But it is very easy to mistaken a cult mascot for a charismatic leader. In an MLM-type organization, their leaders are almost worshiped, can do nothing wrong, and are untouchable. Anything they say is suitable; that’s the mentality. These leaders are almost like demigods. 

Insurance is a great career path when you start on the right foot. So take your time and do your research before committing to any organization. The six red flags listed in this article will guide you when choosing to join an organization. Even if it takes you a week or two, ensure that you do your homework on the agency you picked interest in. Go on, become the great insurance agent you’ve always dreamt of.