Definitely need more details Bob. We could use a complete picture of your mother's current estate. Who owns what, how much, and how is ownership titled? What trusts are in place and what are the relevant provisions? You can start by running a projected estimate of your mother's estate tax liability (and your resulting inheritance) if she continues with the current plan. That will give us a baseline for comparison.
It sounds like your father established a credit shelter trust (bypass trust). If so, then your mother is not the actual owner of the assets, the trust(s) are. This means that if structured properly, the insurance agent is absolutely correct that the death benefit proceeds will pass to the heirs without going through probate and without being subject to inheritance taxation. I imagine that he is proposing that the trust by the insurance on your mother's life. If that's the case, how much she can gift, estate tax exemption amounts, lifetime gift credits, etc, etc will not much matter. The fancy part is usually getting the money to make the premium payments out of her estate in the first place. The credit shelter trust will have already taken care of that.
My biggest concern is that at her age she can't buy enough insurance to make the benefit worth it. How much did the agent say she could get for $750k? $1.2M maybe $1.5M? Could the money have grown to this amount (or more!) by itself in a reasonable period of time? How much risk would she be willing to accept to forgo the guarantee of the insurance? You also need to keep an eye out for look back periods if any new trust and/or gifts are being established.
This kind of planning usually falls into the arena of chartered life underwriters (CLUs). They are kinda the top dogs of insurance. Is this agent certified in any way? The concept is not his own. If he is not qualified to implement and analyze the validity/suitability of a plan like this, then you can always take the idea to a more qualified individual.