General Questions From Newby

[billyg]

I am in the midst of evaluating a career change and have numerous questions regarding insurance sales. I have read a number of posts on this board, so I have some familiarity of many of the topics, but I need some clarification on a number of items:

1. With FE sales, I understand that for an independent agent the initial commission should be somewhere between 80% and 110%? Is this typically advanced 100%? What is the typical residual commission in year 2 forward?

2. With Medicare Supplemental the typical commission for an independent agent is between 15% and 25% (Correct?).

3. I have read quite a bit about being Captive vs Independent. I am still not clear on the distinction here. It seems some agents think they are independent, but they are somehow captive to their FMO or IMO. Can someone please help clarify?

 

[Norwayguy]

I am in the midst of evaluating a career change and have numerous questions regarding insurance sales. I have read a number of posts on this board, so I have some familiarity of many of the topics, but I need some clarification on a number of items:

1. With FE sales, I understand that for an independent agent the initial commission should be somewhere between 80% and 110%? Is this typically advanced 100%? What is the typical residual commission in year 2 forward? - Commission amount is about average, normally not advanced 100% more often 75% 2 year could be from 5-12%

2. With Medicare Supplemental the typical commission for an independent agent is between 15% and 25% (Correct?). - Yes Depending on State, Company and plan sold

3. I have read quite a bit about being Captive vs Independent. I am still not clear on the distinction here. It seems some agents think they are independent, but they are somehow captive to their FMO or IMO. Can someone please help clarify? - As an independent you should be able to sell for pretty much any company you like. Captives normally can only sell for their main carrier or through a brokerage owned by that carrier and normally do not own the client relationship. Yes some companies have standard practices which will not allow you to change your contract to another IMO without a 6 month period of not writing for that carrier...ask for an upfront release[/quote]

See Bold points for response

 

[souldeux]

I am in the midst of evaluating a career change and have numerous questions regarding insurance sales. I have read a number of posts on this board, so I have some familiarity of many of the topics, but I need some clarification on a number of items:

1. With FE sales, I understand that for an independent agent the initial commission should be somewhere between 80% and 110%? Is this typically advanced 100%? What is the typical residual commission in year 2 forward?

2. With Medicare Supplemental the typical commission for an independent agent is between 15% and 25% (Correct?).

3. I have read quite a bit about being Captive vs Independent. I am still not clear on the distinction here. It seems some agents think they are independent, but they are somehow captive to their FMO or IMO. Can someone please help clarify?

1. With FE sales, 80-100% is a reasonable comp range for a new independent agent. At those levels, though, be aware that you're probably going to be generating your own leads - all the folks that tout "free lead programs" for their agents are taking a nice override for their trouble. Trails are usually around ten percent, give or take a handful. I won't speak to the "typical advance," but I will say I would spend my days huddled in the corner crying if I made my living off of 100% advanced FE cases. The chargeback ratio would mean I put 75% of my money back to guard against my debit balance and the other 25% towards gin and Pepto Bismol to ease the pain. Take a six month advance, if you must at all.

2. That sounds right to me, but Frank's the real Med Supp guru.

3. A captive agent is an agent restricted to selling a certain product line or to giving that product line the "right of first refusal" to a new client. Ask yourself three questions:

-Can I sell any product to any client, providing that client meets the carrier's guidelines?

-Are my commissions paid directly to me, not to an agency and then to me by that agency?

-Can I leave my upline at any time while keeping all of my written business under my name?

If you can't answer yes to all three questions, then you're (in my definition) not truly independent.

Does that clear things up?

 

[billyg]

Thanks Guys. I appreciate your clarification.

Bill

 

[jody108]

What career are you transitioning out of?

 

[johndale]

Jody and I are curious about your transition. Hope you can update this thread.

 

[billyg]

For the last 10+ years I have been with a software company, initially in technical positions, but the last 5+ years in sales and new business development.

 

[Frank Stastny]

2. With Medicare Supplemental the typical commission for an independent agent is between 15% and 25% (Correct?).

3. I have read quite a bit about being Captive vs Independent. I am still not clear on the distinction here. It seems some agents think they are independent, but they are somehow captive to their FMO or IMO. Can someone please help clarify?

Twenty-five percent is a little high, probably closer to as high as 22%. There aren't very many new contracts being offered much over 22%.

There are different types of captive agents. Some are truly captive with an insurance company. This means the agent can only sell the policies that are offered by that individual insurance company. That's not too bad a deal in some situations.

The captive situation with an the typical IMO or FMO is where an agent signs a contract at a specific percent of commission, it may be below street level, and is locked in at that percent of commission and the IMO/FMO will not release the agent to go with another marketer at a higher percent of commission unless the agent stops writing business with that insurance company for usually around six months.

In my opinion is the worst kind of captive situation is where the agent signs a contract and in doing so the agent assigns his/her commission to an insurance agency. This means that every policy the agent writes belongs to the insurance agency. The insurance agent is not the "agent of record" (AOR), the insurance agency is. Commission and renewal checks are in the name of the agency, not the agent.

When the agency gets the checks, the agency decides how much of that check is going to go to the agent. It can be dramatically less commission than what the agent would get if he/she were an independent agent and receiving checks directly from the insurance company, fifty percent less.

On top of that, if the agent leaves the insurance agency the agent walks away with nothing for his/her hard work. The agency gets to keep 100% of any renewals the agent may have coming.

I think that is a total rip off. I would never recommend that an agent assign their commissions to anyone under any circumstances. Others may disagree with me but they are usually agency owners, not agents who have worked in a situation like that.