Mortgage Protection Life Insurance Market Insights with Patrick Pegram

Patrick Pegram

Patrick Pegram, also known as “Skipper”, is a 30 year life insurance industry veteran and has to be one of the most experience mortgage protection experts out there.

There’s a lot of hype around the mortgage protection life insurance market and Patrick gives us the truth on what you can actually expect and how to best work this market.

2:35  MetLife and Century 21 partnership in the mid-80’s
14:50  Sell to their immediate need, don’t do a full needs analysis.
27:00  Current mortgage protection data and lead discussion
35:40  Data examples – Statistically why NAA (and other MP outfits) can’t realistically work.  NAA is in the lead business, not the life insurance business.
43:05  Cost per lead and what seasoned mortgage protection agents are doing.
50:15  Why it’s difficult to sell mortgage protection over the phone.
53:00  Many mortgage protection sales are final expense products.  Top agent that does $500k+ does a lot of final expense.
55:30  Live search of mortgages in 1 state and how many leads can actually be generated.  (great perspective)

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Jeff Root: All right, let’s get to it. Today we have Patrick Pegram, from Legacy Insurance Group. Welcome to the podcast, Patrick.
Patrick Pegram: Thank you for having me, Jeff. Glad to be here.
Jeff Root: Yup, great. Why don’t we start with some background about yourself. You’ve been in the industry for, what, 20-plus years, right?
Patrick Pegram: Yeah, actually, this is my 30th year in the business. When you start measuring in decades versus every other year, it starts to get real real quick, but actually I started young in the insurance business, only a couple years out of college, so I then joined Metropolitan Life, a career agency, as you all know, every familiar with that name. A couple of things happened there right when I had joined. They actually had bought a real estate company we all know, Century 21, and they had envisioned a insurance agent in every Century 21 office. At the time, they had a big property and [inaudible 00:03:03] division at Metropolitan, and they wanted to sell homeowners insurance, because in the mid-’80’s also with [inaudible 00:03:11] came a deregulation where brokers, banks, could start having an insurance license. Their vision was to basically have a split commission with an agent to the broker, so we could sell homeowners policies and eventually, again, the mortgage protection, as it was termed. They called it mortgage insurance back then.
It worked out really well. They had a very good system of training life guys as P&C guys, so we were extremely well trained on the P&C side, and did pretty well. Myself, I was in the Detroit/Toledo, Ohio, Detroit, Michigan area, in between the two cities, and I had three real estate offices, oh, within probably a five-mile radius, maybe six, of each other. It was a nice area south of Detroit, and as a young man, I was still in my early, mid-20’s, and it gave me an opportunity to get a high volume of insurance. Yes, I had to split a whopping 50% life commission with a broker at 70/30, and the same thing with P&C, but it in turn gave us a lot of volume at the time of business. We walk around today of, “How are we going to get leads, how are we going to get leads?” Well, each office generated about 50 to 70 closings a month, and I had three of them, so I had 200 new prospects a month to sell homeowners and life insurance to. That kept me extremely busy, obviously.
I was very typical, six days a week, typically worked on Saturdays because that’s when real estate sold a lot, and on Sundays. I usually took a Monday off, and lived, breathed, and did everything with Century 21 Insurance Services, as they called themselves, which was a division of MetLife. Had a wonderful career there, I was the number one producing agent in the company, and also at the top five Metropolitan nationally for life insurance. The whole system was, I was a very organized individual, and I had a way of basically endearing myself to the broker, because it still had to build on relationship building. An agent couldn’t just get thrown in the office and they had to do business with you. You still had to woo your way in, because what you were selling is not how they really make money.
Jeff Root: Right.
Patrick Pegram: They make money on that nice one percent, two percent they’re making on the closing of a $100,000 house. Their 30% on a $350 premium at 20% commission, being the whopping-
Jeff Root: 60 bucks, yeah.
Patrick Pegram: -nothing, so you can’t jeopardize … You had to find your way to endear them, and one of the ways back then was Metropolitan came up with a good way of doing a homeowners policy with instant issue, where I could provide a death page for the mortgage company to accept and close. That wasn’t really available a lot back then, instant issue. It was a lot of handwritten binders and stuff. This was an instant issue setup, which was unique. Now it’s commonplace, today, but my laptop was an old 200 … What’s it called, a 286 from IBM. The battery was the size of a car battery. It had a six-inch screen. This was big technology back then, and we were able to do a lot of policy issues right inside the real estate office. I had a routine where I was just bouncing from one office to the other, making sure they got their closings, and we basically did about one out of every three homes closed, or sales done, in that office. I was able to bring on board with Metropolitan, which is a huge percentage, roughly about 60, 70 new homeowners policies per month.
Jeff Root: Wow.
Patrick Pegram: Mind you, an agent is usually going to do simple, small office that’s your mom-and-pop agency, like a State Farm, they’re lucky to do that many in a month, of themselves, and for a big office, most of the time it’s between 20 and 30 of them. Here I am, just one little guy, bouncing between three real estate offices, doing about 70 a month. I was really cranking it out, and basically that’s all I did, is to get in the door, meet them, get them a policy, put a little bug in their ear about mortgage protection, covering themselves, and basically let the mortgage close. Let everybody make their money, they gave me the relationship, and then I just basically worked the book of business afterwards, and would see these folks at night a lot of times. Obviously, most of them were just home buyers in their 20’s, 30’s, and 40’s, so you had to see them at night. It was really all about covering their mortgage at that time.
Now, that was an easy sale because I’ve already established a relationship with them, and they let me in, and I was basically the first one to talk to them about it. Over time, I’ve learned that that is the key to mortgage protection. The first person to talk to them about it usually wins. Out of all those homeowners policies I sold, at least 75% of them bought mortgage protection from me.
Jeff Root: Wow.
Patrick Pegram: That means I was first in the door, and they all bought. Now, back then, mortgage protection is like what [inaudible 00:09:13] fully underwritten, decreasing term, and I think the biggest term level was five-year term, on a level based. Most of the time, it was a decreasing term program, or whole life with a five-year term rider. You’re looking at that type of program that you were selling, and it was very easy to sell. Now, mind you, mortgages where I was at were a lot of first and second time home buyers back in the day, where you had a starter home of $50,000, so I was writing a lot of small policies; but then I’d talk to the people, and I ended up converting a lot of those policies a few years later, when I was still at MetLife, into UL’s because they needed additional coverage; or I’d talk people into buying a UL right off the bat. Again, $100 a month was always the simple asked. It depends how young they were. I had a simple rule, I had a 90/10 rule. If they were in their 20’s or 30’s, 10% had to be maybe permanent, and 90% had to be term insurance, just because of affordability and to make sure they had the coverage.
I learned that early in my career, that it’s more important to have the coverage they need at a young age than what they want. Everybody wants to save for retirement at 20 bucks … I mean, at age 25, rather. That person could put 40 years into a UL at 12% interest rate, or 10% at the time that they were getting, and those illustrations look fantastic. Obviously, they didn’t stick around that long; obviously, the rates went down to four percent 20 years later, but that’s what you did back in the ’80’s. I never did, I always did it at a smaller percentage rate to illustrate, but the main point is it was easy to convince somebody to put 100 bucks away to save for retirement back then. They would do that at the … probably at detriment of covering themselves for what they really needed. I learned that early in my career, to make sure somebody was covered properly, rather than selling a high-priced, high-commission product like UL, making sure they at least had a five-year term policy that covered their basic needs of replacing income.
Four months into my career, I had somebody buy a policy from me. They loved the idea of I used to do an old story called the “hundred man story,” and I’d sell somebody on the idea of putting $100 a month away. They loved it, went over their budget. They really could only afford 60 bucks at the time, but that only bought the guy about $70,000 worth of insurance, and he was a young man with three kids and the wife was at home. Realistically, $60 could buy him $400,000 of coverage. Now, as a new trainee, you have your manager, and so they’re telling you, “Sell him the UL, sell him the UL.” I said, “Well, he needs the 400,000, not the 70,” so I told her to get the hell out of the house while I finished up the term policy. I was very determined, because I was a young man with my father who died when I was two years old, so my ma struggled for raising me in the ’60’s and ’70’s, and so I understood, put myself in their shoes, and I determined I would never let that happen to any of my customers.
Unbeknownst to me, three weeks later after the medical was done and they issued the policy, the man turned his car over on the freeway and was killed. The ironic thing about that is I’ve stuck to my guns, and understood how important a term insurance is. This is a story I tell a lot of people, whether I’m recruiting somebody or, these days, I would just tell a customer something that’s very moving in a sales presentation. The bottom line is, is I know it meant a lot to that family personally. I seen them through that tumultuous time, and the funny part is is all three of those kids graduated from college.
Jeff Root: Awesome.
Patrick Pegram: With the money that we were able to put aside for them, plus the living expenses and making life easier for them, they had enough money to go through college. I kept in touch with them for 25 years. I think the last few years they lost touch, because they’ve got their own lives, and the mom was still alive and remarried about ten years later. It’s a nice story that I use, especially in the selling situation, of how having the proper protection when you’re young is important, versus just being sold on a great idea, saving, saving, saving. You still need to do it, but people need to get a habit of spending money on certain things. It helped me in my selling career, obviously, with mortgage protection, because I could sell that story in a mortgage protection selling situation, and I’d sell it every time. It was a pretty simple thing, especially if I got a little pushback.
The MetLife program did a couple of things for me. It told me that with volume, being first in the door, that’s how mortgage protection is sold; and having a good story attached to mortgage protection like the one I just mentioned is also helpful, because it’s an immediate need sale, not a total valuation sale. A lot of times, agents that are taught in the fully underwritten market, they’re doing a needs analysis. They’re doing the full financial overview. Well, if they were actually interested in that, they would never have sunk the [inaudible 00:15:14] that you have sent in for mortgage protection. They’re interested in an immediate need, impulse buy decision. Now, that doesn’t mean you’re not going to do that a year from now or two years from now, but they’re impulse buying right now, and that’s why that card or mailer is sent to you. You have to basically take into account that it’s a immediate need, immediate sale type situation, and it’s an impulse buy, so you have to design your presentation around satisfying what a customer wants versus more than what they need.
You’re job as an insurance salesman is obviously to make money, but you’re establishing and account, or a client, with that customer, that first sale. We have a little saying in our office here at Legacy Insurance Group, which is my IMO, is, “Every time you make a sale, all you have is a customer; but when you make the second sale on the house, that’s when you get a client. When you make the third sale on a house, that’s when you have a client for life.” That is true to form in almost any situation, if you been in the business a long time. Clients are golden, referrals from clients are golden, and when you just have one sale or a quick in-and-out, they’re just a customer, which means they’ll just go with the next guy down the line that talks to them. Working your book is extremely important to be able to have that relationship and cross sell into other product lines, cross sell for doing a financial needs analysis or overall insurance review. They’ll invite you back in if you’re doing something, because they already have that relationship with you.
Jeff Root: Right, and that’s true-
Patrick Pegram: Something like one-time … If you treat them like a one-time, one-and-done sale, then they’re going to feel like that, and that’s not what you want to do in the long run, and that’s what you see a lot of.
Jeff Root: Yeah. That’s a really good point.
Patrick Pegram: [crosstalk 00:17:18]?
Jeff Root: No, yeah, I was going to say it’s a really good point, and with internet life insurance leads, it’s the same thing. If somebody’s requesting a $250,000 policy, and an agent wants to be the consultant and the financial planner and try and sell them a lot more, when really you just need to get in the door. The way you’re saying that you sell mortgage protection, give them what they need, they’re trying to cover their mortgage, that’s what they want, give it to them, establish the relationship. I love that approach. You’re simplifying things, and you know that the long-term value of this is going to be a lot more than what you’re getting today.
Patrick Pegram: We call it relationship building. You can’t have a relationship unless there is some type of exchange, or obviously a purchase being done. Once that is done, then you can build on the relationship. It’s like your first date. You can’t build on a relationship unless you have a first date with a girl, or a guy. It’s no different. I was lucky in the ’80’s to meet a gentleman who was up and coming as a motivational speaker. You all know the name Anthony Robbins, or Tony Robbins. He and I met in 1985, when he was basically nobody at the time, so it was a lot more fun back then to get to know somebody. We’re about the same age, and about the same height, and had a lot of the same [inaudible 00:18:50]. The guy was brilliant at [how-ing 00:18:52] how to relate or build relationships, or understanding how people think. I learned a lot as a young salesman off of him, and to establishing certain rapport and skills with just relating to people and listening to people. The one thing I’ve been able to do is correlate this a lot with insurance.
Most insurance men talk too much. They don’t listen. That’s the difference. When you start listening to your clients, they always tell you what they want. That’s it. When it come to mortgage protection, they’ve already told you in one way. Now, I’ve been continuing mortgage protection throughout my entire career. It’s never been my number one way of making money, but it’s been a part of an overall life insurance and commercial insurance strategy. I continued on with MetLife until the 1990, and decided to leave them because they had, as any company does, when they got a good thing going, especially a large one, they screw it up. They decided to merge the field force with Century 21 Insurance into MetLife field force, and as soon as that happened … All MetLife cared about back in that time period is burning and turning their own book of business. It was all about selling life insurance. P&C was lacker slot. In fact, I went to the Detroit region, where they had 175 agents in one office, and there was one guy selling P&C. He hated it when I came there, because now I was competition because he had no competition.
It was a thing that they didn’t realize how much money could be made in P&C, and I just turned it out and blew that guy out of the water. I mean, this guy’s doing about 60,000 a year premium with just P&C and another 60 in life insurance, and I come in and do 60,000 in P&C in the first two months. They just couldn’t realize, and they saw the checks coming in, and MetLife was full of the guys back then that were managers getting ready to retire, and they were just all about building their last three years of … That’s how their retirement programs were looked at, is their last three years of income. It was all about any kind of first year commission. Anyhow, they started screwing it up. I didn’t like their burn and turn philosophy, so I left MetLife.
In the meantime, during all of that, I also was building a large business in the group health market. I liked working with business owners, and happened to bump into quite a bit with these real estate folks, and just started talking to other businesses and started selling health insurance. Really enjoyed it, and so I left MetLife. I left a lot of money on the table, almost a half a million dollars in first year commissions that hadn’t been paid yet. That’s a tough thing to do, but I had already built up an [inaudible 00:22:03] group health agency, which they gave … They condoned it, they didn’t care because I was making enough money for them. At least that nailed it up enough where I could walk away and still have a decent revenue coming in, and that was a residual type income benefit, which gave me about $100,000 a year, which was pretty nice. It gave me an opportunity to walk away from MetLife and still have money to pay my bills, and I hadn’t even turned 30 yet.
It was a lot of work, went into doing all of this, but what I found is I ended up going into helping out a friend of mine that was needing a lot of group health insurance. He owned what they call today a PEO; back then they called it an employee leasing shop, and they really didn’t have a clue what they were doing. Another gentleman I knew had a small payroll company that I basically took over and moved him out, and I founded a company back then that specialized in a one-stop-shop approach to group health, Worker’s Comp, the whole bit. That’s how I made my fortune, if you want to say it anywhere. I continually managed to do mortgage protection in my local area as part of the overall theme of what I do on that. Made a ton of money in every angle, but I learned in this business, as I learned each product, learned everything, we keep writing business from different areas. I was a full lines agent, obviously, property, casualty, and life insurance and health insurance, and group products, and 401K’s.
I did it all in that area, but I did it in phases. I learned the product, then added it to my portfolio and became very good at it. It was never an all-at-once type of thing, but having this overall majority, it did pretty well on the life insurance side with the payroll company because I was doing a lot of business owners, and it taught me how to really sell a lot over the phone. I had one year personally I did over 3,000 businesses over the phone, never met a customer.
Jeff Root: Awesome.
Patrick Pegram: That took a lot of work and talent, but they trusted us and I attribute that to a lot of what Tony Robbins had taught me about listening skills over the phone. I know you can make money over the phone and establish a relationship, but it’s not the same in in the life insurance side versus a payroll company [inaudible 00:24:37] a relationship, because I added health insurance, Worker’s Comp and business insurance, buy/sell agreements with the owners. I added so much where there was so much day-to-day contact that the relationship built over time, where when you sell life insurance over the phone it’s just a one-and-done sale. You try to establish a relationship, but it’s difficult. When you have a business relationship with a business owner, and it’s every day they see your name, that’s a different story. I learned a lot of things during that time period that I applied for that business, and then again, another thing I learned from MetLife was branding.
I learned how to brand my company, brand what I did, and MetLife, at the same time back when I started with them, they also bought Snoop. Sometimes, being at the right place at the right time, as a young man it taught me how powerful a brand can be by simply being the old Metropolitan stuffed shirt, briefcase toting guy one day, and then the next day Snoopy’s my boss and Charlie Brown’s the CFO. People lightened up all of a sudden. It lightened up their entire image by that simple purchase, and being able to brand themselves with Snoopy and the Peanuts characters. That stuck with me as a built my other companies, so I always was important about branding. Mortgage protection itself, as we started branding a little bit more on the mailers, I built a little bit of an agency in the Michigan area and we became very good at it. Never more than five guys, because I wasn’t interested in really building anything. I was more interested in personal sales.
I always tell folks, “Personal sales is where you make money, not recruiting,” and boy, am I horrid at that. I made a fortune at personal sales, but never came close to what I made at recruiting somebody.
Jeff Root: I will second that.
Patrick Pegram: Yeah, it was a lot of things, and I enjoyed a 26-year career in personal sales and I actually retired until my wife kicked me out of the house and said, “Hey, go get a job, you’re driving me crazy.” I called up a friend of mine and got back in, and that’s how Legacy started back in 2010, the end of 2010. Came back into the business to try to teach folks what I’ve learned along that line, and mortgage protection, as we’re here to talk a little bit about that, I want to shed a little truth about mortgage protection that a lot of people don’t know, and that is where the money’s coming from, where the money’s at. Now, back in the day when guys like myself and my age group were doing mortgage protection, we had to do it on the only underwritten market. You either went to your local county, got the list of people who just closed, and recording in the … I think it’s called the [lie-ber 00:27:41] index in the county, and you got those names. You either wrote them down or you had to pay somebody to do it for you, or I think the county would give you a copy, but it was $1 a page. It was really crazy stuff like that.
Usually, you hired some high school kid and taught him how to do it, and he wrote them down in every county, just so you can get those letters off every week to each individual person before somebody else did. A lot of footwork, that’s part of the prospecting method that you learn as an insurance agent. Then you had a chance to go in with your company and fully underwrote it, and make a sale. That’s prospecting. Now, direct mail and everything has developed a lot in the last 15 years for mortgage protection, but the data gathering hasn’t. It still is just I would say the last ten years has become automated, where most of the counties are now tapping into a simple automated system where people can get that information through witness gatherers. Now, the companies that do list gathering, there are a ton of them out there. You’ve heard a lot about TransUnion, Experian, Acxiom. These are data gatherers, but they’re actually not good places to buy mortgage protection data. That’s not what they do. They only update that data once a month, which means they’re buying it once a month and then putting it in there.
You have to go to a data gatherer that specializes in new home sales and mortgages, and they’re few and far between, and as I will attest to, we don’t give out that information. It’s not cheap. It’s not like buying a list of names to go door knock from somebody. It’s about six, seven times more in cost.
Jeff Root: What do you look at for mortgage protection lead, as a cost per lead? The way you do it, with this updated data?
Patrick Pegram: The cost per lead, I’m going to get into that in a little … I don’t believe in buying mortgage data on a per lead, cost per lead basis. That’s something that some IMO’s and … I could name names, and everybody would know who they area.
Jeff Root: NAA.
Patrick Pegram: Specialize in mortgage protection. I’ve had a lot of their offshoots. They’ve had a lot of people leave NAA, start their own IMO’s up, basically taking that information. Basically, everybody, the general knowledge is there, but there’s actually an enormous cost, up-front money that needs to be paid to actually get leads, where most individual agents can’t afford to do it unless they’re just sitting there locally doing 100 to 200 first class mailers a week like I used to 25 years ago. Those guys still are the biggest bulk of mortgage protection agents, getting their data locally. They’re just trying to get one or two leads every other week to do mortgage protection to make a life sale. They’re part of their overall prospecting for life. It’s still going to be seminars, or it’s going to be speeches at the Kiwanis Club or the Elk and all, things along that line. They’re going to do what they’re going to do to get in front of people for their networking situations, and mortgage protection’s just one extra thing to get in front of more people.
They’re going to be getting referrals, they’re going to hit those referrals up for insurance, and so on. Those agents that do that mortgage protection business are actually probably the most successful at it, because they’re really looking at it as a local scenario. They’re not going out like NAA does and have guys take 40, 50 leads with them and hit Charlotte, North Carolina or Nashville, Tennessee or anything like that in a group, and they’re going to hit a bunch of people up at that time that just bought their mortgages, and they’ll bring in some big closers and bam, there’s 25 sales, and then they’ll move to the next state. [F-V 00:32:03] has sold a lot that way, too, and that’s great, but the local guy that’s plugging in, that their county might only have 100 mortgages closed in a month, they’re not going to get that many leads for mortgage protection. That’s just part of their prospecting method, and they’re going to try to talk to those people as much as possible.
I know one guy that he just buys a list of names from me, and he door knocks his county because there’s only about 300 people in his whole county that have a closed mortgage, and he still writes about five mortgage protection policies a month for door knocking that as part of his overall strategy. Again, it really depends on … But the data is extremely important, because now with the computer age, the data is gathered pretty much near every major metropolitan city. It’s really, you close the mortgage on a Monday, the county records it on, say, a Wednesday, and it’s available to me on a Thursday. It doesn’t pay anymore to send somebody down to the courthouse, when I can buy that data from a list vendor, that gives me the data basically 24 hours after it’s been recorded in the county.
Jeff Root: You’re getting it before anybody else really does, right?
Patrick Pegram: In most situations. Now, you’re biggest competitions are going to be real estate companies that have built insurance divisions. The scenario I gave you before with Century 21, MetLife sold that company long ago, and there’s a [inaudible 00:33:44] competitors that are large in each state. We have a company called Real Estate One here in Michigan that’s dominant now in Michigan. At one time it was Century 21, but now it’s Real Estate One. They have probably a good market share of the closed mortgages in the metropolitan Detroit area, and they have their own mortgage company, they have their own insurance company to sell homeowners policies to, and now they’ve got their own life division. They’re doing all that business and getting in front of people, yet it till takes an exceptional individual to work hard to be able to make a lot of sales, so whether you can control that at a corporate level at a real estate company, I don’t know. I don’t see it. It still takes that exceptional individual to make a ton of money. We’ll see how that goes.
I honestly think it’s the data. You get it quick before everybody else, and then we mail it out. Now, what makes us different, Legacy, NAA, SFG, that’s a lot of initials at you. Those guys, they’re all doing one thing. We’re mailing everybody as much as possible. Now, NAA will go in and mail an entire [inaudible 00:35:04], stay where all the metropolitan areas where most of their agents are, and they just mail it, whether they got an agent ordering it or not. Same thing with a lot of the bigger companies. We do the same thing, and it’s basically how fast we get that letter out to that individual and how fast we can fulfill the printing, the putting the information in a envelope, and getting it off to the person, whether it’s first class or third class. [crosstalk 00:35:30]-
Jeff Root: Do you find that the first one in wins, or is that how it usually works?
Patrick Pegram: The first one in may or may not win. Here, I’ll give you a simple … We keep track of the numbers. Any metropolitan area, I’ll use something simple, Baltimore, Maryland. Here’s an area that’s very close to a couple of major metropolitan areas. Baltimore, it’s close to DC, so that area there. That information for those counties right around these metropolitan areas are instantaneously available, but because of the population is so high, there’s a lot of insurance agents, and NAA and everybody else is also mailing to these areas. You close a mortgage in one of these areas, Baltimore might generate itself, the county and the city, maybe 2,500 mortgages for the entire month of February, 2015. Now you’ve got a bunch of companies mailing to that same area for 2,500 mortgages. Now, the rest of Maryland might only get another 1,000 to 2,000 mortgages. That one small, condensed area, there’s only going to be that 2,500. That’s true in almost every state. Right around the main cities, within a couple counties, that’s it, that’s where most of the mortgage closings are.
Jeff Root: Right, so 2,500-
Patrick Pegram: In rural areas, they’re not closing.
Jeff Root: You have 2,500, and your response … There can’t be that many leads.
Patrick Pegram: At best, depending if you’re one of the first three in the house, and the first person might look at it and just toss it aside and forget about it. Let’s say they get the first letter comes in, it comes from NAA, they look at it and they set it down, and then they get my letter a day later. They go, “Oh, yeah, I thought I just had this,” but now open it. They all look the same pretty much, and the letters all look the same. They’re reading it, and then they’re interested, and then they’ll put it in. By the time it’s three days later, and everybody has joined the pack, now it looks like junk mail and they’re going to toss it. It really is about being one of the first three in. Now, just on what I know about direct mailing, if you’re one of those first three you’re probably averaging about a one percent return. The mailers are very specific, and people know exactly why they’re sending them back. There is no smoke and mirrors with mortgage protection, it’s pretty blunt.
“Do you want life insurance to protect your mortgage? You want disability insurance to protect your mortgage? Send it back.” It’s pretty simple along that line, so to expect more than one percent is ridiculous; but if you’re running a little late, you’re fourth or fifth in the house, you’re probably going to be around a half of one percent. That’s a big difference, especially when you’re in Maryland. Think of this: If I am in NAA or anybody else, I’m going to give you the big secret here. I’m mailing to an area of like Baltimore, and I’m going to get one percent on 2,500 mortgages the entire month of February. That’s 25 leads.
Jeff Root: In all of Baltimore.
Patrick Pegram: All of Baltimore, Baltimore County. Now, I know they have more than one agent near there. [inaudible 00:39:21], they boast they got 10,000 agents nationally. They’re right out of North Carolina, not too far away, and same thing with one of their competitors that started off as … It used to be NAA manager, SFG, they’re also in North Carolina, and they’ve got people in the same area. Here you are as a company, you’re only getting 25 leads, so how you going to split that up between 10 agents, 15 agents, 20 agents?
Jeff Root: It doesn’t make sense. The numbers don’t work out for these [crosstalk 00:39:52]-
Patrick Pegram: Here’s the secret. These companies, they’re not in the insurance business. That’s an after effect. They’re in the lead selling business, just like any other vendor. What they do is they sell these leads over and over and over again. What these companies are buying old leads that haven’t been done, but they get these young people that they recruited for some pie in the sky, “You can make $200,000 if you just sell this lead” thing, and what it is is what they’re using young, or newly converted, agents to do is they’re financing their leads. People that have never had any sales experience in the business, they’re buying these leads thinking they’re going to get rich. They can’t make a sale, and then they sit on the shelf for the one or two experts that are in the area that really know how to sell, will buy at half the cost. It’ll get resold three or four or five times. They’ll make all the money back, plus some, and they’re going to clear out on this.
They’ll sell them anywhere from $60 to $25, and then down to 10 or $15 if they’re really a month or two old, and been bought or sold three or four times. I’ve seen them go and sell six-month-old leads, too, that haven’t been sold yet. You can get some luck with aged leads; it’s been proven that that happens, it’s just a lot of work. You look at their leader boards, and they’re all guys that could do 30 and 40 and $50,000 a month in sales, and you’re a young guy coming in like, “Yeah, I want to do that, so I’m going to buy all the leads I can,” not realizing that they’re getting all fresh leads, and you’re not. They’re getting first crack at all the fresh leads, and you’re getting … Basically cherry picking. The guys that really sell are buying fresh leads, and then whatever they don’t sell, it goes back into the bin and is resold and regurgitated three, four, and five times.
If you can make it with them, you’re a lot less than one percenter. They have 10,000 insurance agents at NAA; 100 only produce more than $10,000 in a month.
Jeff Root: Wow.
Patrick Pegram: That isn’t something that I brag about. What it is is, agents are basically financing leads, and that’s the dirty secret. How do they do that? They know they’re buying leads, they’re paying them commissions, they’re recruiting, their commission levels are low to begin with, so they have to hire employees who letting them buy leads that are cost efficient. In reality, a vendor that can get the data and send it out on a daily basis, on a per thousand basis, it’s going to cost you over $600 a thousand to do this type of mailing. If you want to break it down, you get one percent on a thousand-piece mailer, that’s ten mailers divided by 600, that’s $60 a lead. That’s what it costs. A seasoned agent, somebody that knows what they’re doing, they’ll be able to sit down with eight of those ten and sell at least three-quarters of them. Out of ten leads, you’re going to probably walk out with six applications to a guy that knows what he’s doing.
To a new guy, they’re going to do half of that, and now it becomes, “I had a 60% commission, can I keep affording to buy leads?” That’s the reasoning why people get in and out of this business so quickly. NAA and the other companies, they’re only care about recruiting because recruiting is about your unit. It’s not about the individual, how well they do or how well they are able to add customers anymore. It’s whether or not that manager can produce, not the individual can produce. The manager just keeps regurgitating one body after another. If his goal is to have ten applications, or $10,000 of premium in his downlines, he doesn’t care if he has one agent do it or ten, as long as that [inaudible 00:44:41] is producing. They have multiple units, and multiple layers; there’s too many middlemen. That’s where all the commissions go.
In reality, you’re selling simplified issue products nowadays, because there has to be enough commission to pay the IMO and the seven downlines they’ve got before you as an agent start up.
Jeff Root: [crosstalk 00:45:04] quickly.
Patrick Pegram: [crosstalk 00:45:04] difference. Yeah. You get paid quickly and you get issued quickly, and the pricing is about three times more than what you can get if it’s fully underwrited. Now, [inaudible 00:45:16], it may be 50% more, but in reality, you’re selling simplified issue term, and it’s going to get replaced within the next couple of years by somebody, and it’s usually when they start listening to those quotes online, on those TV ads, or maybe the get a mailer from one of Jeff’s guys on the internet, an email or something where you’re doing some advertising. They do a search engine optimization where they can get a quote online, and they type in that $200,000, 20-year term policy, and it’s $22 a month. They’re going, “Wow, man, I just bought my mortgage protection at 125,000, it’s 45 a month.”
Jeff Root: Yeah.
Patrick Pegram: That’s double the fact, so they … A responsible person’s going to replace that insurance eventually. Now, mortgage protection is not sold to responsible people, otherwise they wouldn’t do impulse buying.
Jeff Root: Interesting.
Patrick Pegram: Whether or not they’ll get replaced, all of them, you don’t know. What I’ve seen in the business, if you sell them properly, fully underwritten first, that client’s going to keep that policy a long time and you got a client for life that’s going to convert that policy, add to it, whatever it takes. The difference is is if you’re going to drop mail, you need to sell simplified issue because you need the commission, because you’re going to basically have to pay for that mailer. A lot of us have done final expense, and it’s the same way if you’ve got to replace that. Now, the people are a little bit better, and the persistency is a little bit better than final expense, obviously, so you don’t have those issues as much, and the sales, the return on your investment, is higher, and the overall picture is higher; but there are very few companies that offer and cut out all the middlemen in the mortgage protection-
Jeff Root: What is your go-to product right now? I’m sure this changes every once in a while, but what is your go-to product today?
Patrick Pegram: Oh, it does. It does. I was very big with Assurity, but we put them aside because of their rate increases, but you could get a non-[med 00:47:38] product up to 350 at a what they called “select rate,” which was between a standard and preferred rate for most companies that are fully underwritten. You could get a decent rate just about fully underwritten, and non-med. They had about a 50% rate increase for guys over 40, so we had to replace them. Our current go-to, and has been for a while, is Baltimore Life. A couple of reasons for it. There’s a lot of commission in that product, they’re pretty well priced from 10 to 30 year term, or 15 to 30 year term, rather, but they’re also pretty good on their liberal underwriting. I’ll give you an example I just happened to happen to dig.
Last night, one of my agents called me up, it was after hours so they weren’t able to call and get a risk assessment. A gentleman had cancer five years ago, it was throat cancer, they did surgical and radiation, no chemo. Stage II cancer, no big deal. Well, most term companies, even simplified issues, aren’t going to take it, especially if it’s within five years. Baltimore has a pretty case-by-case, liberal side to it that will take the case, as long as it wasn’t Stage III or higher, and that he’s a non-smoker, since it was throat cancer. They wrote it on their standard rates, under their simplified underwritten product called Home Secure term, which is a typical simplified issue, it’s table four standard type of underwriting, so they have some liberal situations there; but they put some stipulations on it, and then they have some nice underwriting there.
We really like them, and the commission and the pricing is pretty much right on, especially with people that are under age 50. We enjoy using them. Most of our agents start at 100% commission with them. I say that because most NAA agents start at 60 with them. We offer just as good of leads [inaudible 00:49:48] and everything like that, so it’s a little different scenario, because our system, our model, is to cut out all the middlemen. There’s only one level above you, which is the [M-G-A 00:49:58], and that’s it. They don’t have that, so …
Jeff Root: Yeah. I want to clarify, too, that you’re running all these leads locally, because there’s a lot of internet life insurance agents listening to this podcast. You’re talking about running these direct mail leads locally, right?
Patrick Pegram: Yeah, yeah. In your state, yeah, where you’re at. Face to face type selling. I found that it’s very difficult to make a living today with mortgage protection over the internet, or over the phone. Right, when using direct mail.
The reason for that … Yeah, because they’re using direct mail, and the cost of the lead to get is just too high. You can’t make money on doing a protective life drop [inaudible 00:50:44] type of situation, a fully underwritten. You can’t make money on $30 a month, I’m sorry. The lead costs you twice as much, so you just can’t make that kind of money. You have to look at simplified, face to face for it to work. Now, some of the companies like Baltimore allow you to do a phone app, like a voice signature app, so they’ll do that too. There’s a lot of companies, a lot of … Most of the companies have internet e-app situations, you can do that with Mutual of Omaha, for instance. You can also do it with … Foresters allows you to do [I-go 00:51:28] apps along that line, so [inaudible 00:51:30] of the fully insured. You can do a lot of e-apps and have people sign things and do it over the phone that way. You’re just going to have a hard time closing at much, but if there’s specialists on the phone and really listen, I’m sure you can make some money at it, or give it a whirl on that line.
Again, the selling process, the impulse buy, you’re certainly not going to close six out of every ten leads over the phone.
Jeff Root: Okay. Do you direct mail within a certain radius of somebody’s location, or is there any rhyme or reason to that? How far would you go, I should ask ask well.
Patrick Pegram: Our company is very protective of territory, because we don’t resell the leads. They’re exclusive to the agent. You cannot have more than a couple of agents in every state, so we don’t have everybody working mortgage protection only. Most of our guys are working both mortgage protection, final expense, or one of our other markets. Like I said, the way I did it for 30 years after I got out of MetLife was I just made it as part of my general prospecting of what I did every day to make money. If an agent does that with mortgage protection, they’ll make money; but it can’t be-
Jeff Root: Your only lead source.
Patrick Pegram: You can’t rely on it. It can’t be your only-
Jeff Root: You need several lead sources.
Patrick Pegram: Exactly. It’s a lot of work, there’s only a couple hundred agents in the country that can make a living off mortgage protection alone. Now, my top agent now, he does about a half a million dollars a year, but he mixes it between final expense and mortgage protection. A lot of mortgage protection sales result in final expense sales, because you get a lot of leads back of 60 and 70 year olds that are refinancing 25, 40, $50,000, but their health conditions warrant that they can’t get term insurance, but only [inaudible 00:53:24] whole life.
Jeff Root: Interesting.
Patrick Pegram: We come up with a new process years ago, we call it payment insurance. Instead of paying off the mortgage, you get enough insurance to make your payments for two years. That way, you got a $70,000 mortgage, but the payments are 700 bucks a month, so you just do 700 times 24, there you go. You got $16,800, so you can write a 17 to $20,000 policy to make payments for two years. It’s all [F-E 00:53:59], and that’s something that they something they can afford. That way, and the way you explain it in our presentation is, you’re helping your family get through the process of you passing, and at the same time they’re able to make the mortgage payments and then get the house on the market, maybe three to six months later, and sell it at the right price and not have to be burdened with the house going into foreclosure or anything. Everything’s paid for. Then your house will sell at the right price within two years, and it basically is going to have the same result.
In that situation, why pay off the mortgage for somebody that’s 65 years old? Just do payments and then sell the house, and then pay off the mortgage that way. If there’s a profit to be made, then that’s the estate, or whoever does the executor of the estate is able to split it up that way. There’s a profit. In essence, you’re helping somebody by giving something what they want and need and afford, and still have the same result. We call it selling the payment, not the mortgage. It’s just a different approach to mortgage protection, but you have to look at two-thirds to three-quarters of all your closed mortgages in the state are going to be refi’s.
Jeff Root: Are you mailing to those refi’s as well, or just new home mortgages?
Patrick Pegram: Yes.
Jeff Root: Okay.
Patrick Pegram: Yeah, they’re mailing to refi’s as well. I’m going to log online right now, I’m going to do a simple count of how many mortgages there are in a particular state. What’s a good state for your listeners would be?
Jeff Root: Do California.
Patrick Pegram: California, okay, that’s going to be the largest state, and so they’re going to have the most mortgages closed than any other state. Let me see here, it’ll take me a second, but what I have found is even with that large situation … There we go, I’m going to do a monthly account here now of California for the month … Let’s see, we just passed March, so let’s do the entire … Today’s Thursday, so all the numbers are up to date. Good. I’m going to put a minimum $10,000 mortgage, because that’s what I usually do as a minimum when I’m looking at the list. There’s a lot of mortgages that are sold under 10,000 that are simple transfers to relatives, like $1 sales, $2 sales, stuff like that. You want to do at least $10,000 as a minimum value, so that will get rid of about ten percent of your mortgages that are just simple deed transfers. The total mortgages now over 10,000 for the entire state of California … There we go. Okay, in the entire month of March, California closed 55,614 loans over $10,000. I think you got about 40 million people in California?
Jeff Root: Mm-hmm.
Patrick Pegram: There’s only 55,000 mortgages. Now, if I was to mail that entire state, those 55,000 people in the month of March, and I got my one percent return, that’s only 550 leads in the entire state. Last I checked, California’s a little bit bigger than Delaware.
Jeff Root: Yeah. 550 leads for NAA agents out there, they can starve.
Patrick Pegram: Exactly. You’re never going to gather that many leads together in one state. The only way to do it is to start lead banking, selling them, reselling them, and reselling them. Believe me, there are companies that sell me software for me to actually put these leads into a PDF file, and allows an agent to go in, see how many are in a county, buy the leads right then and there. They’ll stay in his lead bank for 30 days, and then boom, they’re moved right back into the open market if they haven’t closed.
Jeff Root: Wow.
Patrick Pegram: I mean, there’s actually companies that sell that software right now. I’ve seen it, it works great if you’re selling leads all the time to your insurance force as an IMO, so when you see this as a mortgage protection guy, you just have to be wary of those IMO’s out there. Now, we can get the mail quicker out than anybody that’s doing it individually, so we’re going to get the most leads; but if you do it for an entire state, and if you get enough in mail … Everybody that buys leads from a vendor or fulfillment house, they have to mail at least a thousand pieces of mail. For them to do it on a daily basis, so they’re first or second in the door, they’re not going to be able to do that within a small radius from where they live.
Jeff Root: Yeah. Years ago, when the mortgage protection days … NAA used to be pretty hot. There used to be a lot of leads coming through, because there were a lot more mortgages, right?
Patrick Pegram: There were a lot more mortgages. Back in the day, even from the refi market, there used to be about six to seven times that amount of leads. California, I remember seeing a half a million a month of closed mortgages back in the early 2000’s. In Michigan right now, we’re doing about 15,000 a month, and I remember when it was over 70,000 a month, back in the heyday. You could make a living and do a lot of mortgage protection over there, because there was just more mortgages being sold. Yeah, it just faded away with the amount of mortgages going down.
For most of all, refi’s are through the HARP program, which is a rate refinance for people that are upside-down in their mortgages. You’re getting people that are already in financial stress that are getting these mortgage protection letters, so a lot of people are thinking mortgage protection is back. Well, in reality, the housing market still isn’t back. Even new home sales are down, and the biggest key in the factor that you’re going to see is what’s called … Not new home sales, but existing home sales. That’s an economic factor, and you’re not seeing existing home sales, I don’t care who you are, in any area where existing home sales, that means one house to another, when you’re working at about 20% at that [inaudible 01:00:57], 15% of your mortgages. That’s not an economy that’s robust, and that’s the way it is, almost the entire country except in Texas and the DC area. Pretty much everybody else, the housing market just collapsed in California over the last six years.
Where I would buy a three-bedroom ranch in Michigan for $120,000, $150,000, basically any Midwestern town would do that, they were 500, 800,000 in California back in the day. They were outrageously priced, and now those houses are down to about 250, 300 in California, so you’ve gotten the market adjusted, obviously, to the home values; but it’s still, the economy isn’t that great in California, still. Don’t listen to the lies in Washington, the home market isn’t there. You cannot make a living on selling mortgage protection on its own, but you have to deal with an MGA that can do volume mailings, make it affordable for an agent to buy leads at cost.
Jeff Root: And know what they’re doing, and can train you to sell it.
Patrick Pegram: Exactly. Exactly. It has to be a situation where you’re looking at it as a cost basis. If you’re making money off your leads, you’re not an insurance MGA, you’re a lead vendor. It’s simple as that. If you can break even, do volume, break even, that’s it, then you’re concentrating on putting skin in the game with your agents by making sure they’re succeeding at making sales, because that’s the only way you can make money. If they can’t make sales, you can’t make money. I like that approach, that’s my personal approach [inaudible 01:02:53], because I was a producer for 26 years. I would want the guy that’s working with me on my success to be dependent on my success. For me, I put myself in a situation where I mentored a lot of young agents now, and I teach them everything I know, and I know a hell of a lot because I was very successful as a personal producer, so why not tell that to every young person that’s working in our agency? That’s just a given.
I think that’s what you have to look. It doesn’t matter, it could be the guy next door to me, but the point is is finding an MGA that you like, you can work with, that can be a good mentor, can teach you something, and does enough volume in mortgage protection so they can do the leads right. There are not many. There are a handful out there, and the ones that do are not going to give you a fair commission, and [inaudible 01:03:56] that. Look toward just below street for a commission for simplified issue product, which is between 90 and 100% first year commission on a term product. Like I said, we give out 100 on Baltimore Life, I think 90 to 95 on Mutual of Omaha. Might be 90 with American Amicable, they have a good product but they don’t pay as much in commission to the IMO’s, so in essence the agent doesn’t get out, but they have a great rate for 10 and 20 year terms. For simplified issue product, sometimes you take a little less to have the best product. At least you’re still making decent money.
Jeff Root: Real quick, I had an agent ask me this, too. I asked a few people if they had any questions for you about mortgage protection. You just mentioned 10, 20 year terms, so his question was, “Are you trying to cover the whole, if they bought a 30-year mortgage, the whole 30 years, or a shorter period, say ten years, to lower their premium and just get in the house before the next guy quotes them?”
Patrick Pegram: Well, here’s my experience talking, because I’ve seen it over 30 years doing this. Most people don’t stay in their houses for more than seven years. They’re in and out. Now, that was true all the way up til about six years ago. Since then, people are going to be stuck in their homes for a long time, and with the rate refi’s, they’re going to be in their homes a lot longer. There’s no cross-town purchases of the next house with a little higher value. Those days are gone. It’s going to be 10 or 15 years before we see that again. What you’re looking at right now is people are realistically, in my opinion, you’re going to be in those houses at least ten years, maybe more. If you’re selling mortgages 15 or 20 years long, cover the whole term.
Jeff Root: Okay, good.
Patrick Pegram: Stay away from products that are return of premium. I think the only value in return of premium is that 30-year return of premium, and I have yet to see anybody stay 30 years in a mortgage. Yeah, mortgage rates are extremely low right now, but I don’t see anybody even staying in a mortgage for 30 years. They’re going to sell that house and move on to the next house. The bottom line is is return of premium is a gimmick, just like a lot of them things. You’re going to see the pricing be about 50, 60% higher, or even doubling, on a 30-year term, and it’s going to be on a 20-year term, forget it, it’s almost going to triple the price of the base policy. If you got a $30 a month base policy price, you can expect to see a $100 premium.
Jeff Root: Got you.
Patrick Pegram: Just to get return of premium in 20 years, because they need more money, so effectively get that time value money to get that money back in 20 years. Now, you’ll see a 30-year term return of premium plan be about 60 bucks, versus a 20-year begin 120, 110, $100. That’s how difference that ten years makes in the time value of money. Personally, I would rather sell somebody a UL product that would … wants to put some money into a UL at that point instead of return of premium. At least that money can be used at that point, but that’s a little bit more sophisticated purchasing, and simplified products mean simplified training and simplified agents. A lot of agents don’t know how to sell an IUL, or even a regular UL. They know how to do the simple stuff, so the guaranteed UL, term insurance, and the non-par whole lifes, because it’s that simple to underwrite, that simple to do an application, and that simple to get it paid.
Jeff Root: Right, got it.
Patrick Pegram: There are very few agents anymore that really know what they’re doing training wise, so that’s another reason to get into an MGA that offers good cross-product training, to let you know what life insurance is really all about.
Jeff Root: Got it.
Patrick Pegram: Get good experience along that lines. That’s my opinion, anyhow.
Jeff Root: Yeah. Patrick, thank you so much for all your insights here on mortgage protection, and the industry as a whole. You have probably the longest-standing mortgage protection experience I’ve ever heard of. I don’t know, that’s … Did I just call you old? I don’t know if I did that, I’m sorry if I did.
Patrick Pegram: Well, I am, I just turned 52, so I’m not that old.
Jeff Root: Okay. Patrick, if people wanted to get in touch with you, where can they find you?
Patrick Pegram: I’m very easy, I’m on the web at, is our site for Legacy Insurance Group. An agent can go down at the bottom of the home page and basically click on an e-book, we call it the agent brochure. One about one of the things that we promote, which is success through partnership. All of our agents are partners, our success is building that partnership with everybody. They’ll get a good idea, most of the agents can just go to the content page and send me a quick email. They’ll see my mug on the page, and I’ll be more than happy to chat with them and tell them a little bit about what I know. I give my information freely to any agent along that line, so feel free to email me, call me. A lot of folks know me as on an insurance board Twilight, and so they can get some information there. That’s something I’ve used for a while, and more than happy to help anybody that wants to give us a call.
Jeff Root: Awesome. I appreciate your time, sharing your wisdom, and I’ll talk to you again soon.
Patrick Pegram: Sounds good, Jeff. Thanks for having me.

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