Is Primerica a Pyramid Scheme? Breaking Down the Primerica Business Model

If you’ve been considering investing in or partnering with the life insurance agency Primerica, you might be asking yourself one question – is Primerica a pyramid scheme? The company has been offering financial products for almost fifty years, and doubts about its business model have existed for a long time. Taking a closer look at the Primerica business model helps you spot concerning traits and things to steer clear of.

Our team of experts at Business2Community has carefully put together this guide to help you determine if Primerica is a pyramid scheme. We will examine the company’s background, business model, and public image to see if it is a legitimate company and if it is safe for you to invest in.

The Primerica Business Model

While Primerica certainly does not seem to run a pyramid scheme, its business model is fairly similar to MLM, drawing criticisms from users and former employees. Those who sell Primerica products are paid commission-only and there are no health or dental benefits.

As one of the largest life insurance companies in the US and Canada, Primerica offers various financial products such as life insurance, term insurance, mutual funds, and PFS investments. The company has over 140,000 life insurance agents in North America, helping clients and generating sales across the country.

Primerica is publicly traded, which, in theory, makes it a more credible business entity given its more transparent structure. However, the insurance provider has been called out for its multi-level marketing operation. The company claims to not be an MLM business.

Although MLM companies are fully legal in the US, many consumers and people formerly involved in this business model believe it is unethical. In this section, we’ll dive into Primerica’s company structure to see how it makes money and if it is running an MLM business.

Background of Primerica

Founded in 1977 by entrepreneur Art Williams, Primerica was originally called AL Williams and served as an independent agent for higher-income families in the American insurance business sector. Later, its affiliate companies became Primerica Financial Services, Primerica Life Insurance Company, and Primerica Financial Services Investments.

For the first two decades after its creation, the term life insurance company actively expanded its business through a series of mergers and acquisitions. It sought to combine assets with other life insurance companies.

In 1993, Primerica merged with leading American insurance company Travelers Insurance Corporation in a $4 billion deal and changed its name to Travelers. At the time of the merger, there were about 10,000 Primerica agents. The deal strengthened its position in the industry. Travelers, a publicly traded company on the New York Stock Exchange, also saw a big rise in its shares from $1.125 to $37.75 following the merger.

Five years later in 1998, Travelers merged with Citicorp to form one of the largest financial services companies in the world, Citigroup, by offering insurance and financial products in 100 countries and regions. The announcement pushed both companies’ valuation to $70 billion with their combined assets valued at $698 billion. To this day, Citigroup continues to be one of the leading American banks.

Citigroup attempted to sell Primerica in 2008 after seeing its growth and business opportunity. Despite having several interested buyers, the deal was never pushed forward due to undisclosed reasons. One year later, Primerica held its initial public offering (IPO) at $15 per share, raising $320 million for the term life insurance company.

Since its IPO, the Georgia-based public financial services company has seen stable growth in revenue after suffering a hit from the global recession in the late 2000s. During COVID-19, Primerica sold $109 billion in new term life insurance with the total term life insurance coverage reaching $900 billion in 2021.

Its 2023 revenue was $2.82 billion and had a market capitalization of $7.67 billion at the time of writing.

MLM Elements: New Insurance Agents Pay for Their Own Training Sessions

The recruitment process at Primerica is different from that of most other insurance companies. Instead of hiring talent with previous experience in another insurance agency, Primerica allows interested candidates with no background in investment products to receive training in the company before obtaining an insurance license to sell insurance and financial products. This is referred to by the company as its Business Opportunity.

However, the training fees are not covered by Primerica. New hires have to pay a $99 fee to be a licensed salesperson, in the US. In addition, every Primerica agent has to pay $25 per month ($28 in Canada) to access Primerica Online, its online business portal for managing sales and clients.

Primerica relies on the membership fees from these new Primerica agents to make a profit. On its official website, it is stated that only a partial refund will be given to those who have completed the training as an independent agent but choose not to work at the company.

A user posted on Reddit in 2023, claiming that their husband found a dream opportunity at Primerica, but there were multiple red flags in the recruitment process. The user went on to say that the recruiter asked to meet the spouse to make sure everyone would be on board with the new role, despite the spouse not having any business with the insurance agency.

They added that having the new insurance agents cover the mandatory training process was another major red flag and called Primerica out for its multi-level marketing tactics to earn money from trainees.

MLM Elements: Primerica Relies on New Recruits to Bring in Sales

Aside from the personal commissions insurance agents get from life insurance sales, they are also entitled to earn commissions based on the sales made by their recruits. Primerica agents are encouraged to train new insurance agents to sell insurance and financial products to earn more commissions.

It is important to note that Primerica agents do not get rewarded directly for recruiting and training new talents. They are only able to generate a cut when their teams can sell products and find clients. Since establishing their own teams allows them to get more clients indirectly, it works in the agents’ favor to recruit.

Therefore, what is pitched as the Primerica Business Opportunity is all about network marketing to effectively generate more sales for the company as well as the agent. This kind of business model (or something similar) is found within every single pyramid scheme and MLM company alike. The main difference between pyramid schemes and MLMs is usually that the MLMs focus on selling a real, profit-making product or service. When the business is entirely reliant on growing the network to survive, it’s likely a pyramid scheme.

Having existing employees recruit new hires can often be seen as exploitative, predatory, and resembling a network marketing company. Reddit users have called out this recruitment method, saying it’s multi-level marketing and that it’s “a barely legal version of a pyramid scheme” that would force you to sell insurance to family and friends.

Primerica Focuses on Its Insurance and Financial Products

As a financial services company, Primerica primarily generates revenue from its life insurance business. As of 2023, it had insured 5.7 million active life insurance policies and recorded 2.9 million active investment accounts within its network. In terms of term life insurance coverage, the company was the third largest in the US and Canada.

Since its business model heavily focuses on bringing in new talents and selling insurance through employees’ networks, it does explain the company’s upward performance in recent years.

Is Primerica an MLM?

According to the Primerica website, the business denies being a multi-level marketing company, saying that it follows an insurance agency model and that it does not engage in any sort of multi-level marketing activities. It also strongly disputes claims that it runs a pyramid scheme.

Multi-level marketing can often be confused with pyramid schemes. While there are similarities between the two, they do not operate in the same way. In the US, running a pyramid scheme is illegal and the company could get charged with fraud offenses, whereas, multi-level marketing is considered to be fully lawful.

MLM companies often come under fire as consumers generally perceive this form of business as unethical due to relying on people selling to their network and promoting the role as being an independent business owner with often-inflated earnings potential. Therefore, MLM companies tend not to declare up front that they are involved in multi-level marketing or direct selling.

Since Primerica has a real, sustainable product that recruits focus on selling and it is set up to be a legitimate company, the answer to the question “Is Primerica a pyramid scheme?” is a firm no. However, the real question is whether Primerica is a multi-level marketing company even though it repeatedly claims not to be.

Primerica’s business model no doubt highly resembles a multi-level marketing business. There are many company traits that show its employees rely on network marketing to make a profit and salaries are solely based on sales and commission, with each agent getting a cut from the sales of those they recruit as well as their own sales.

To illustrate further, we’ve broken down the business elements of Primerica to show you why it appears to be a multi-level marketing company.

A Life Insurance Agent Earns From Finding New Insurance Agents

A key feature of a multi-level marketing company is the commissions earned through the sales of your recruits. It is important to note that for pyramid schemes, most of the time, there will also be commissions for directly recruiting new hires, even if they have not made any sales. Therefore, pyramid schemes tend to focus on bringing in new people and possibly without an actual product to sell, whereas MLM companies emphasize generating sales by broadening your network.

In this case, Primerica does fit a classic multi-level marketing structure but doesn’t seem like a pyramid scheme. Primerica agents only get a cut when their referrals make their first life insurance policy sales.

Primerica Focuses on Network Marketing

Network marketing is a pillar of Primerica’s operation. Primerica agents receive commissions through sales, producing a great incentive for them to invite friends and family to join the business, either to buy insurance or to join the company.

Network marketing is also a classic multi-level marketing setup that helps recruits find more clients within your own personal network and turning people around you into paying clients and possibly your subordinates. There is a lot of content on social media platforms of people promoting their products and their earnings from the company, for example.

https://www.tiktok.com/@itsmichael_x/video/7294049741527108869

A Primerica Agent May Need to Invest in the Company Themselves

Primerica offers training on investment products and sales techniques to help a new recruit get qualified as a licensed insurance agent at the cost of the recruit. This recruitment process highlights yet another key feature in multi-level marketing – having to pay a fee before you start making money. Furthermore, at Primerica, you have to pay an ongoing fee to remain with the company and to access its online portal.

Some companies call it a membership fee while other organizations call it a license fee. Regardless of the name, MLM companies always charge a fee before a person can carry out actual work duties.

This is a big reason why Primerica is happy to take on recruits with no previous experience in the insurance industry. The company benefits from training a new hire even when the new hire decides not to work for the company afterward.

Licensed insurance agents also have to pay a monthly $25 fee to use the Primerca platform. Most normal insurance companies do not ask their employees to pay a fee to remain in the company. That’s why the business model of Primerica highly resembles that of an MLM company.

Primerica is Fully Accredited by the BBB, But Only a 2.5 Rating

The Better Business Bureau (BBB), a Virginia-based NGO focusing on improving the online marketplace for American consumers, rates Primerica A+, meaning it is deemed a fully legit company that offers legal and safe financial products and life insurance policy coverage to users.

Although Primerica is accredited by the Better Business Bureau, it only holds a 2.47/5 rating with hundreds of complaints against its business structure.

An alleged former employee criticized Primerica for wrongly advertising job positions. The person was under the impression that the role would be a financial advisor helping clients buy term life insurance products. However, they were then forced by Primerica to recruit other agents through their existing network.

The user also mentioned filing a complaint to the Better Business Bureau to no avail.

Another alleged former independent agent wrote that they had to make 50 cold calls a day but never received any money from the company.

Former Employee Called Primerica an MLM

TikToker Cobbie has been posting about his experience with Primerica as a former independent agent for the business since 2023.

In one video, the TikToker called Primerica an MLM scam despite being a legitimate company federally. He went on to say the Primerica Business Opportunity was a lie as 99% of employees would not get paid as they can’t make enough sales.

@cobbielol is primerica a scam? #fypシ #primerica #mlm #primericascam ♬ original sound – Cobbie

According to Primerica, the average cash value received by life insurance agents at the company was $7,185 in 2023. Note that the figure is the mean of all life insurance commissions paid, meaning some agents could have received a much higher amount while others were paid nothing.

Is Primerica Safe and Legit?

Legally speaking, Primerica is a legitimate company selling insurance and financial products. Despite being considered a trustworthy company by the Better Business Bureau, its operational tactics strongly resemble a multi-level marketing company. Over the years, Primerica has insisted that it is not a network marketing company nor does it engage in pyramid schemes.

As of 2024, Primerica continues to be one of the leading life insurance companies while attracting criticism. MLM companies are not inherently bad. However, it can be a dangerous and predatory business model that forces new insurance agents to recruit other agents to make a living. MLM schemes rely on the agent to find clients through their existing network, creating a bad business atmosphere.

Although Primerica is a fully legit company with no history of being in trouble for engaging in any pyramid scheme, customers are not happy about its direct selling approach. In the 21st century, consumers are more conscious about ethical and sustainable business operations. Even though an operation is legal, it may not be enough to please users. If you are thinking about investing in Primerica or starting your own business, you need to do your due diligence to ensure that you follow a company that shares the same ethical views and holds a positive brand image.

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