Are chargebacks for earned commissions common?

[Bunny95]

Deleted.

 

[fed up]

That Allstate agent is an ass. Allstate auto is a 6 month policy and home is annual. Find someone else to work for.

 

[mudhound]

sort of agree with the above.
I am as earned. I have a "few" chargebacks. Mostly NSF's or not taken. I have had a whole one re-sended plans. in 32 years!

 

[shonceman]

I was in an interview for an Allstate agency, and the owner told me that I'd have to pay back all commissions, both as earned and advanced, if the client cancelled their policy within 12 months.

Like even if they paid for 8 months and then cancelled, I'd have to pay back the entire 12 months of commission...

I really do not understand what he meant.

How often do people cancel their policies? I don't see how I could guarantee that they stay insured for 12 months. Is there a way around this?

I’ve never worked for a captive P&C company. But I have worked for captive life companies. 100% chargebacks for first year lapses are not unusual at all in that environment.

No, you can’t guarantee that an insured doesn’t lapse, but sound business practices can prevent lapses.

Would it be weird of me to tell agencies that I don't want to be paid any commission until the chargeback period is over? Like can they hold my commission until then?

Just keep a percentage out yourself. Maybe 10-20% of your commissions going into a savings account that you don’t touch unless you need money because of excessive chargebacks. I’d definitely rather hold the money myself than leave it in the company.

 

[Fire]

In fe your going to have 15-20% chargebacks first yr . It’s the type of clients we deal with. I track every nsf in the first yr down but your going to lose some .

 

[Newby]

Would it be weird of me to tell agencies that I don't want to be paid any commission until the chargeback period is over? Like can they hold my commission until then?

Why would you do that? Are you so afraid that you will spend the money that you can’t trust yourself?
I worked with 100% chargebacks for the first 13 months during my first 10 years in the insurance biz. It was with funeral pre-need insurance. It went great. You just make a reserve account. Put 20% of each commission in your reserve account and pay chargebacks back out of that.
If you waited a year to be paid it would be the same thing. Except you are giving up control of your money. That would make no sense at all.
A better plan would just be don’t go to work for Allstate. Just get in the selling Final Expense like the rest of us do and make 120% commission with no chargebacks on The months they paid a premium. Check out FexContracting.com to learn about doing that.

 

[shonceman]

The advice is great, but I'm not understanding. If I put say 20% in savings, how would that pay for a 100% chargeback?

It wouldn’t. But you’re not going to lose 100% of your policies, are you? Here’s what you might do: Find out what the average lapse rate is for a first year Allstate agent. Put that percentage of every commission into savings. That should be enough, unless your experience is much worse than average.

But, one other note. Your apparent level of risk aversion makes me concerned about you taking on a P & C agency. I’m kind of risk averse myself, so I didn’t go with Allstate when I had the opportunity. There are other, less risky ways of being in the insurance business. A good one would be to call Scott (@Newby who posted above) about Final Expense. You might find that’s a better fit for you.

 

[Newby]

The advice is great, but I'm not understanding. If I put say 20% in savings, how would that pay for a 100% chargeback?

They aren't going to charge back 100% of your sales you make. Only the ones that quit paying. So probably 10% or less. So if you sell $100,000 and 10% quit paying they will charge back $10,000.

 

[marindependent]

I don't see how I could guarantee that they stay insured for 12 months. Is there a way around this?

You Can't.

There are so many reasons for people to leave you its crazy, sell their house, move out of state, get married/divorced, someone dies, insurer nonrenewals, etc. I would say on average the vast majority of defections I see are something that is totally out of my control. For captive agencies a big part of the problem is the pricing and the inability to shop it around, some clients will just get sick of it and find an independent.

I too believe that this Allstate person is being... too hard on it. I would consider looking around. I think charging you for commissons not earned that is fine, but for earned commissions, hum...

 

[gdoumit917]

I was fortunate to work for a good life carrier. I understand why they chargeback but it should be pro-rated.
Considering Final expense is a great idea at the moment as well as other coverages like hospital indemnity, long term, critical illness. The key is to find a niche market and a company you think provides the best coverage for your market. And it will sell itself.