Forethought...you're Kidding, Right?

Todd King

IMO/FMO Owner
5000 Post Club
11,044
Virginia
Received this a couple of days ago. What do you think?

Debit Balances
Dear Forethought Final Expense Agent:
In order to provide you with the money necessary to buy leads, pay expenses, and conduct your everyday business, Forethought Life Insurance Company ("Forethought") provides up to a 12 month commission advance on new business. Forethought advances commission to you based upon the belief that each new policyholder will make regular payments of monthly premiums for the policy sold to them. On the occasion that a policy becomes inactive, the selling agent is charged back for the 12 month commission advance on new business and a debit balance is created. A debit balance occurs when there is an insufficient amount of new business or advance commissions to satisfy the debt caused by a charge back. A debit balance also occurs when premium paying customers do not have adequate funds to start their policies (NSF), or choose, during the first year, to cancel their policies. Under our guidelines, agents are charged back 100% of the advanced commission during the first 12 months. Forethought deducts current charge backs against newly placed advanced commissions to provide you with your debit balance. As a result, debit balances can have an adverse effect on your ability to recognize a full commission advance on future new business. Please log in at www.forethought.com to review your current debit balance and commission statement.
While we have a conservation department assisting in keeping your policyholders active, we have noticed an unfavorable increase in the amount of NSF's on new business. To combat this trend, Forethought will soon be introducing the Commission Protection System (CPS) that will ensure new policyholders have the money to be drafted before advancing commissions to you. The CPS is able to verify whether the funds are available before the agent receives an advance. Our research shows that 90% of all not-takens, or lapses, during the first 30 days are due to the NSF of the initial premium draft. By verifying the availability of funds, agents will see fewer debit balances and better persistency. The CPS is the best way to protect the integrity of our commission advancing system!
Debit Balance Process
For those agents with a debit balance, you will soon be receiving a letter asking for repayment. Our current collection process allows agents 60 days for agents to repay their debit balances. At that time, agents will receive a letter stating they have 10 days to repay the debit balances or Forethought will have no choice but to pursue available collection options, Vector reporting, and all other remedies as Forethought deems necessary. While it is our hope that no agent is engaged in this process, it is important for you to know that Forethought will not tolerate debit balances. It is our hope to have the top final expense company in the industry. We can only accomplish this by having the best final expense agents writing for Forethought...agents like you. Thanks for your understanding and cooperation.
Sincerely,
Forethought Final Expense Team
 
I don't see a problem here - except:

They charge back the entire advance regardless of how many monthly payments were paid by the client. However - this was stated in my original contract and in my case - no one forced me to sign it 'eh?

Tom
 
I don't see a problem here - except:

They charge back the entire advance regardless of how many monthly payments were paid by the client. However - this was stated in my original contract and in my case - no one forced me to sign it 'eh?

Tom

Funny how your contract says that. Mine says...."When termination occurs during the first policy year due to non-accidental death, surrender, or lapse for nonpayment of premiums due, chargeback of commissions paid in the first policy year will be prorated monthly based on earned premiums"
Just what mine says. Guess they must have different contracts eh? :nah:
 
Apparently Todd.

I am just starting with them and never really thought much about it - until I just took out my calculator.

A true persistency of 75% and would only get paid on 2 out of 4 - yikes!

Guess i need to re-read my other contracts as well.

Ramiz - were you aware of this stipulation?

Tom
 
This is why you take as earned as much as possible. Now I don't work the final expense market, but I do request as earned on most contracts (with the exception of Medicare Advantage plans - I don' think they offer as earned). Most every carrier I use for medical and life I choose as earned. I realize that may not be possible for someone just starting out. But based what you guys are saying on this thread, if someone's 12th premium isn't paid, they charge back the entire commission. I don't see how a carrier can justify that.
 
My contract with ForeThought has always been full chargeback for 12-months for lapses. But prorated for health related deaths after 6-months up to the 12th month.

The 12-months resets too if a policy lapses and you go out and save it even if they're 11-months in when they lapse you start a whole new 12-month chargeback period.

It's happened to me several times through the years.
 
This is why you take as earned as much as possible. Now I don't work the final expense market, but I do request as earned on most contracts (with the exception of Medicare Advantage plans - I don' think they offer as earned). Most every carrier I use for medical and life I choose as earned. I realize that may not be possible for someone just starting out. But based what you guys are saying on this thread, if someone's 12th premium isn't paid, they charge back the entire commission. I don't see how a carrier can justify that.

I don't either. That's a load of BS.
 
I wonder what is happening with Forethought?........They could quite possibly be taken a rate increase in the near future due to under-pricing of their FE products last March. What will we do?
 
Look at what Shenandoah Life is doing on their new... New Vista 3 product....the graded policy version....

"The acceptable level of policies being issued as New Vista 3 must be no more than 20% of an agents overall New Vista policies. They will review the business of agents with any New Vista 3 policies issued in their first ten New Vista cases. Any indication of inappropriate field underwriting that contributes to an overall higher than planned number of New Vista 3 cases for the company will be addressed with the agent and may result in contract cancellation. Mix of business will continue to be reviewed on an ongoing basis"....WTF?

Why?:skeptical: It's a 2 year graded policy with only return of premiums + interest if you die the first 2 years. Why would they care if you put more than 20% of your business under the graded plan? Not only that, it has health questions!:skeptical:

AARP offers a 2 year graded policy with New York Life with zero health questions and a lower premium.
 
Back
Top