Is Transamerica a pyramid scheme? No, but many life insurance companies have practices similar to pyramid schemes.
Here is the conclusion: Many feel pressured to sell overpriced insurance to their family and friends. Their business model rewards you if you’re skilled at recruiting new members. Many feel the company’s checkered past also makes it difficult to sell its insurance.
Transamerica seems like any other insurance company on the surface. However, it seems more like a multi-level marketing (MLM) company with many exploitative practices.
As one of their independent agents, I spent many months thinking I would eventually start earning more. I quit the moment I realized how unrewarding their compensation structure actually was.
In this guide, I will discuss my time working as a Transamerica independent agent. I will also review how you can make money under their business model. Lastly, I will discuss the company’s checkered past and how it keeps trying to escape it.
Most people who end up working for the company are uninformed. So I hope my guide tells you everything you ever wanted to know about Transamerica and its business model.
This article was written by our Editorial Team at Incomepedia with the help of a former Transamerica Independent Insurance Agent.
Table of Contents
My Personal Experience
My story with Transamerica began in late 2021. I had completed high school a few months prior and was working as a librarian at a public library. The job wasn’t very demanding. However, I was being paid minimum wage.
I spent my weekends looking for other jobs in the city. I was hoping to land an administrative role at just about any company. However, most job postings required applicants to possess a degree. I was beginning to lose hope when I received a Facebook message from my friend, Rob.
Rob and I went to high school together, but I hadn’t heard from him since graduation. We briefly chatted and caught up. I told him about my librarian job, and he suggested I try working in the insurance sector.
Rob then sent me a link to Transamerica’s website. He said he had been working as one of their independent agents for the past two months. He praised the company’s business model and said you could make a lot of money each time you made a sale.
This information definitely piqued my interest. However, I was unsure about working in a sales-type job. I expressed my concerns to Rob. He assured me the company would provide training that would help me succeed. I would just need to pass a licensing exam, and then I could start working for Transamerica.
This sounded pretty straightforward, so I signed up on the Transamerica website and used Rob as a reference on my application. The company contacted me the following day and asked me to visit their office.
I then met with the company’s hiring manager. He showed me a brief presentation about the company and its insurance products. He then informed me about the licensing process and fees.
I was first asked to pay a $125 fee to join the company. Next, I paid a $100 fee for the Life and Health insurance licensing exam and $150 for educational materials. I spent the next two weeks studying for the exam before giving it at a local testing center.
I returned to Transamerica once I received my license and began working for them. On my first day, my manager asked me to create a list of one hundred contacts. This included family, friends, and acquaintances.
I was then expected to approach these contacts and sell them Transamerica’s insurance. I wasn’t fond of this approach, but I did it anyway.
I lasted five months with the insurance company before quitting. I was definitely getting paid more than I was as a librarian. However, the other agents at the company were making a lot more than me because they were skilled at recruiting new people.
The stress of selling insurance to my family and friend had weighed on me since I started with the company. I didn’t want to pull anyone else into this trap I had found myself in. So I quit.
Transamerica’s MLM model exploits its agents in different ways. You’ll pay lots of fees, sell insurance to your family and friends, and spend tens of hours recruiting people weekly.
I hope to stop people from signing up with the company without first understanding these points. So join me as I deconstruct Transamerica’s business model and reveal the skeletons in its closet.
What is Transamerica
Transamerica is an American holding company that owns many life insurance companies. This includes World Financial Group (WFG), which uses an MLM business model. WFG recruits people and asks them to sell insurance using a person-to-person selling method.
The company’s insurance products include:
- Whole Life
- Universal Life
- Term Life
- Variable Universal Life
- Long Term Care
- Accidental Death
- Medicare supplement
The insurance company has over 50,000 agents across the United States and Canada. According to ZoomInfo, World Financial Group’s annual revenue is approximately $250 million.
Transamerica was founded by Amadeo P. Giannini, an Italian-American entrepreneur in 1906. The company initially started as a bank designed to offer financial services for all Americans.
Transamerica rapidly expanded over the next century. A Dutch company called Aegon purchased it in 1999. Transamerica then acquired numerous insurance companies. This included one called World Marketing Alliance, originally founded in 1991.
World Marketing Alliance changed its name to World Financial Group in 2001. The company has remained Transamerica’s only MLM company asset. It has over 50,000 agents in North America and prides itself on its person-to-person selling business model.
You can learn more about World Financial Group’s story in the following video:
President and Staff
Tom Dempsey currently serves as World Financial Group’s President. Dempsey previously worked as a managing director at Transamerica. He has two decades of experience in the financial services sector.
World Financial Group has over 50,000 agents. Image source: World Financial Group
World Financial Group has over 54,000 life-licensed agents, according to its website. These agents follow the person-to-person sales method and promote Transamerica insurance plans.
Is Transamerica a Pyramid Scheme?
So, is Transamerica a pyramid scheme? NOT according to the United States Securities and Exchange Commission. They state:
“[A pyramid scheme is] an investment fraud in which new participants’ fees are typically used to pay money to existing participants for recruiting new consultants.”
Some key pyramid scheme traits include:
- No genuine products or services are sold
- Members are promised high returns in a short period of time
- Members are told the business model allows them to make easy money or passive income
- There is no demonstrable revenue generated from retail sales
- Members must make a purchase to sign-up
- The business has a complex commission structure
- The business model places a high emphasis on recruiting
Why Transamerica Isn’t a Pyramid Scheme
#1. Transamerica Offers Genuine Products and Services
Under Transamerica, World Financial Group offers a number of genuine products and services. Their insurance plans include:
- Whole Life
- Universal Life
- Term Life
- Variable Universal Life
- Long Term Care
- Accidental Death
- Medicare supplement
They also offer Retirement Planning and Education Planning services. The company website states they have helped over 4.6 million families since 2001.
#2. Transamerica Doesn’t Promise Agents High Returns in a Short Period of Time
Transamerica refers to its business model as an “opportunity”. It doesn’t promise high returns or anything about earning a lot of money in a short period.
#3. No Easy Money Promised
WFG’s recruitment page states. “WFG offers access to those that are looking to create a full-time business or one that is part time to earn extra income.”. This statement doesn’t imply “easy money”.
#4. There is Demonstrable Revenue Generated from Retail Sales
WFG hasn’t publicly disclosed how much of its revenue comes from retail sales. However, they definitely aren’t pulling in $250 million per year from the fees they charge their 50,000 agents.
Based on this, we can conclude their revenue likely comes from selling insurance and offering financial services.
Why Do People Think Transamerica is a Pyramid Scheme?
Some think Transamerica because of the following traits:
#1. It Has Sign-Up and Platform Fees
Pyramid Schemes survive off the money their agents pay them. World Financial Group has the following fees
- $125 Initial Fee to Associate (i.e: Joining fees)
- $100 Exam Fee (i.e: the fee for the insurance license exam)
- $15/month Platform Fee (i.e: Fee to get access to a marketing software)
The company pockets the Initial Fee to Associate and Platform Fee. This can make it appear as though World Financial Group is surviving off the fees it charges agents.
#2. Transamerica Has a Complex Commission Structure
World Financial Group allows you to make money in many different ways. However, some of these methods are difficult to understand.
You receive a 25% commission on sales when you first join the company. This commission percentage gradually increases as you recruit new members. This arrangement can make it difficult to guess how much you will actually earn as a Transamerica life insurance agent.
#3. Transamerica’s Business Model Encourages Recruitment
As mentioned above, your commission rate increases as you recruit new members. This implies World Financial Group’s business model pushes agents to recruit people.
How Much Money Can You Earn from Transamerica?
Transamerica hasn’t disclosed how much its agents earn at different positions. They have provided salary information only on the following titles:
|Years of Experience
|Senior Marketing Director
|Executive Marketing Director
|CEO Marketing Director
These salary figures look promising. However, they do not include the salaries for trainee associates and associates. You will have one of these titles when you first start with the company.
The promotion sequence works as follows:
Trainee Associate → Associate → Senior Associate → Marketing Director → Senior Marketing Director → Executive Marketing Director → CEO Marketing Director
The above sequence implies you will need to be promoted multiple times to reach a title that earns $72,000 per year. Based on this, your earnings as an Associate will likely be much lower.
So how much do Transamerica Associates make? According to Glassdoor, they earn around $8,400 per month or around $100,000 per year. However, I don’t trust this estimate because it implies the low-rank Associates are outearning the high-rank Senior Marketing Directors.
How to Earn Income Through Transamerica?
You can earn money in four ways as a World Financial Group agent. These are:
- Personal Income
- Expansion Income
- Bonus Income
- Agency Income
Method #1. Personal Income
As a World Financial Group agent, you will earn a commission cut from every sale you make. This commission percentage increases as you are promoted to different titles:
|Senior Marketing Director
|Executive Marketing Director
Method #2. Expansion Income
You get additional income by expanding your team to other parts of North America. The company hasn’t disclosed details about this earnings method beyond a brief outline on its website.
Method #3. Bonus Income
You can earn bonuses if your team meets a certain sales quota. The company hasn’t disclosed these quotas or bonus amounts on its website. However, an outdated compensation guide from 2015 states that these bonuses range from 30% to 40%
Method #4. Agency Income
You can earn a percentage of the commission from the sales the agents you recruit make. You can also earn commission from the people your recruits go on to recruit (i.e: later generations).
The percentages you get from each generation are summarized below:
You can learn more about Transamerica’s compensation scheme in the following Youtube video:
3 Key Advantages of Becoming a Transamerica Agent.
Pro #1. You Don’t Have to Buy Leads
Transamerica doesn’t ask you to buy leads. Instead, you will be expected to target friends and family for sales.
This is in contrast to insurance companies such as USHEALTH Advisors that ask you to purchase leads. Such leading-buying arrangements reduce your profits greatly. So Transamerica is better than other insurance MLM companies in this regard.
Pro #2. Earning Money in Numerous Ways
The Transamerica Life Insurance company gives you the option of making money in many different ways. You can focus on selling term life insurance and other insurance to customers or focus on growing your team. However, you will need to do both if you want to be promoted.
Pro #3. Lots of Support
World Financial Group offers training and support related to:
- Product knowledge
- Sales and marketing
When used correctly, you can boost your sales using the above training and support.
3 Key Disadvantages of Becoming a Transamerica Agent.
Con #1. Way too Much Focus on Recruitment
Most of Transamerica’s income-earning methods involve recruiting new members. You can definitely make money by selling insurance directly to people. However, you will miss out on team-building bonuses and the extra commission from your recruits if you focus solely on personal sales.
Con #2. Targeting Your Friends and Family
As mentioned earlier, Transamerica won’t ask you to buy leads. However, they do expect you to target friends and family. This can feel exploitative.
It’s not uncommon for people to develop strained relationships with friends and family after pressuring them to purchase insurance. Mixing your personal life and business rarely ends well.
Con #3. Poor Company Reputation
Transamerica has a checkered past that has impacted its reputation. Many people are hesitant to purchase insurance from the company for this reason. I will discuss some of the company’s controversies in the next section.
Transamerica has faced numerous lawsuits in the last decade. Two of the most notable ones are discussed below:
#1. Increasing Monthly Charges Lawsuit
Transamerica settled a class-action suit after improperly increasing its monthly charges. Image Source: Consumer Watchdog
In April 2020, Transamerica settled a class-action lawsuit from policyholders. They alleged the company had increased the monthly charge on their universal life insurance improperly.
Transamerica paid out $88 million in the settlement.
#2. Employee Retirement Plan Lawsuit
In November 2021, Transamerica paid $5.4 million to settle a lawsuit put forward by its current and former employees. These employees accused the American insurance company of offering numerous poor-performing investments under its employee retirement plan. They allegedly lost between $15 million and $20 million after agreeing to this plan.
As you can see, Transamerica is a genuine holdings company that offers many insurance plans and financial services. However, its MLM company division, World Financial Group, exploits its agents in different ways.
I left the insurance company because I was tired of promoting insurance plans to family and friends. I also didn’t enjoy recruiting new agents. But I had to do it because it was a core part of the company’s business model.
Transamerica isn’t the worst company in the world. But there are certainly better companies to work at in the insurance industry.
Who Would Transamerica Be a Good Fit For?
Transamerica would be a good fit for someone with a large network of contacts. This includes family, friends, and acquaintances. You will also need to be comfortable enough to approach and sell them insurance.
You might also succeed under their business model if you are skilled at recruiting new members. This can be tricky given the company’s poor reputation. However, it is possible to bring on new members if you’re good at pitching the company’s business model.
Transamerica isn’t a pyramid scheme. But its business model can impact your personal life and pressure you to do things you aren’t comfortable with.
Frequently Asked Questions
What Does Transamerica Sell?
Transamerica offers many types of insurance, including term life insurance. They also offer financial services such as retirement planning and education planning.
Can You Lose Money as a Transamerica Agent?
You can definitely lose money as a Transamerica Agent if you quit before making a sale. The joining fee is currently $125, so you will make a loss if you can’t make up for this expense.
Does Transamerica have a Good Reputation?
Transamerica has faced numerous lawsuits over the years and regularly receive complaints from their customers. But, it’s important to point out that many other insurance companies receive complaints. And, they keep making money from buying customers every year.
- Parent Company Background: Transamerica
- World Financial Group Background: World Financial Group
- Number of Members: World Financial Group Already Breaking Records in 2021
- Transamerica’s Annual Revenue: World Financial Group on ZoomInfo
- Transamerica History: Our History
- World Financial Group History: Our Story
- World Financial Group President: Tom Dempsey Profile
- World Financial Group Associate Salary: World Financial Group an Associate Monthly Pay
- Outdated Compensation Guide: Compensation & Advancement Guidelines
- Training and Support: Training at Every Turn
- Increasing Monthly Charges Lawsuit: Transamerica Settles Class-Action Suit Worth Up to $88 Million in Credits
- Employee Retirement Plan Lawsuit: Judge OKs $5.4M settlement over Transamerica retirement plan