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You are considering joining Primerica, but have concerns that the company may be a pyramid scheme. You may have Googled “Primerica under investigation” to find that there have been law cases.
Is Primerica an MLM or a Pyramid Scheme?
First, it’s important to understand the differences between an MLM vs Pyramid Scheme.
If you are considering signing up with Primerica for insurance, investment, or financial services, it is essential to do your research and gather all the information before signing up. For example, we know that Dave Ramsey does not endorse Primerica.
So, high chances are you are reading this to know whether to proceed with the company. You are in the right place. Our article will help you understand more about the company and the two must-know cases about Primerica.
Primerica: What is the Company About, and How Long Has it Been in the Market?
Before diving into whether Primerica is a pyramid scheme, let’s discuss how the company works.
You can find a lot of information about Primerica through their website. It is a company that offers family insurance, investment, and financial services. Primerica is a self-proclaimed leading financial services provider.
The company also claims that besides offering these products and services, they offer individuals who want to start their businesses a chance to start a resilient financial services business.
According to the company’s LinkedIn page, they have more than 2000 employees and have licensed 130,000 independent representatives. The company emphasizes its representatives are well trained, knowledgeable, and equipped to offer financial education and sell valuable financial products and services to its clients.
The company has been in the market for more than 40 years and is listed on the NYSE market as “PRI.” Its headquarters are located in Duluth, Georgia, and the company offers services across the US, Canada, Guam, and Puerto Rico.
Does How the Company Works Show a Pyramid Scheme?
The main product Primerica offers is Term Life Insurance. They offer it at a price they term affordable for all families. They also provide life insurance policies that cover the insured from 10 to 35 years, depending on their age. Primerica offers different policies, some of which only give the insured a fixed premium for a predefined period.
The Agents
All their agents are recruited voluntarily through other agents. On recruiting new members, the agent becomes the responsible agent of the recently recruited member. So, as a Primerica agent, you need to recruit more agents to increase your commission.
The Upline
The recruiting agents become an upline, but there are greater uplines at the top level. At the top is the individual who the company directly recruited. These agents motivate agents below them.
Primerica reprograms the minds of their agents to see the opportunities and numerous possibilities they can gain from selling the products, which sounds convincing to people considering joining the company.
On joining the company, your upline recruiting agent will train you on doing the following:
- Selling insurance policies
- Following prospects
- Handling rejections
- Recruiting downlines
- The company culture
As an agent of the company, your payment will be commission-based on your sales. Therefore, there is no fixed amount. So, if you want to increase your income while working for the company, you need to devote time and effort to sell more insurance.
While it may seem specific, Primerica has had numerous scandals. A common concern is the payment system favors some people and the company executives. We cannot verify these allegations, but we can give you insights on two cases involving the company, which everyone considering working with the company should be aware of.
Case #1: ARELLANO V. PRIMERICA
The first important case is a suit by Mrs. Arellano against the company. The insured, Mrs. Arellano, bought a disability policy from the company. The disability policy assured to give the insured, Mrs. Arellano, $1,500 a month should they suffer a total disability. Unfortunately, the insured fell into a pothole in a shopping mall and was later diagnosed with a concussion which affected her capacity to work at a call centre.
The Claim
Mrs. Allerano also claimed she suffered a severe psychiatric breakdown as a result of the accident, which pushed her to attempt suicide. Later, she was admitted to a hospital for half a year.
The insurer paid the insured for a year before terminating their insurance contract. Their reason for termination was an inconclusive neuropsychological evaluation.
Mrs. Allerano, the insured, was hospitalized seven weeks later for suicidal thoughts. She filed the suit, and the company re-initiated the initial contract a year later. Mrs. Allerano filed her lawsuit on the basis that:
a.) The insurer acted in bad faith when terminating the agreed-upon claims on the disability policy.
b.) The insurer refused to acknowledge the diagnosis of registered medical professionals.
The Condition
After the lawsuit was initiated, Primerica claimed the grounds for the disability insurance had been nullified. The defendants of Primerica based this nullification on the basis that the insured did not meet all requirements for coverage. The company believed Mrs. Allerano did not meet these conditions:
a.) Primerica emphasized that all insured candidates should ensure they submit true and complete information during the application. The company claimed they believed that the insured application continued falsified information.
However, the insured maintained that they submitted accurate information. The insurer did not have enough evidence to prove the information submitted was falsified, so the courts ruled out their defense. Regarding this condition, the defendant showed the insurance application.
The Law
The state laws clearly state that an insurance application is not admissible in a civil case. The exception is if the application had been attached to the agreed-upon policy during the delivery process.
The jury judgement awarded the insured, Mrs. Allerano:
- Compensation for inconvenience, humiliation, emotional stress, and anxiety due to the wrongful termination of the contract worth $1.29 million.
- Punitive damage worth $2.5 million and a $2.5 million fine in punitive damages.
- $243, 000 worth in unpaid policy benefits, future policy benefits, and reduction of life enjoyment.
Case #2: The SEC Investigation
Let’s consider the SEC investigation next.
Primerica Life Insurance Company was listed in the New York Securities Exchange market. The Security and Exchange Commission, a broker-dealer, launched their investigation into Primerica for failure to supervise a registered representative of the company who managed to sell unregistered securities through a Ponzi scheme.
From their investigations, the SEC detected the sales were not as reflected in the company’s books, and they did not find any approval of the sales from the company.
During this period, the registered representative had sold more than 14 offerings through illegal sales and had raised more than $27 million from unaware investors. The Ponzi scheme ended in 1994, with the investors losing their money.
Dearborn, the registered representative of the company, was found to have violated the securities act [Section 17 (a)] and the exchange act [Section 10 (b)]
Should I Join Primerica?
The final answer depends on you. I cannot say joining Primerica is a bad or good decision since it depends on your goals. However, my duty is to present you with all the information you need to make an informed decision. Here is what you should consider before investing in the company.
Reasons You Might Want to Avoid Investing with Primerica
We have explained Primerica to be an MLM company. So, they recruit people to sell their services and offer them a commission for every sale. While it is standard practice for MLM, it may not feel genuine to everyone joining the company.
If you have interacted with their agent to invest with them, the agent is trained to sell you a product that will gain them a commission. Therefore, the seller will be more focused on selling the product rather than listening to your needs and explaining all about the product, including the downside. High chances are that you will be tricked into buying a product or service that may not be aligned with your needs.
Additionally, most agents may lack the professional skills and experience to advise or recommend proper investments or guarantee quality. They are more focused on recruiting more agents than developing the products.
NOTE: This is speculation, and we are not guaranteeing this will happen. We have a comment which confirms this may not happen. The note says, “Agents and advisors don’t get commission on recruits or agents. The overrides and commissions are paid only when there is a business transaction with a client” We cannot confirm or deny whether this is true, so do your due diligence.
You have all the information, so the decision to join Primerica now lies in your judgement. While there are ongoing debates on the legitimacy of the company, with some claiming it is a scam, Primerica has an A+ rating, surprisingly, with a 3.37 rating and 143 complaints over three years.
Take Away
Is Primerica a Pyramid Scheme? It’s hard to say based on the information provided, but here’s what we know.
Primerica is a popular MLM company that has been around for four decades and publicly traded on the NYSE. Most MLM companies have had scandals of unfair practices, fraudulent behavior, and scams. We have discussed everything you should know about Primerica. Our previous article also includes alternatives to MLMs which you can do in the comfort of your home if you are looking for a side hustle. Whether you invest in Primerica or not depends on your judgement and investment goals.