How Much Do You Budget for Chargebacks?

[RonSmith1984]

Just curious, how much do you budget or expect in the way of chargebacks? 10% of your weekly AP written? 20%? 25%

I was told that you should budget 25% of your weekly AP written as a chargeback, meaning if you write $4k this week, you should expect $1k to fall off.....seems a bit high to me and I lean towards thinking that if your having 25% fall off the books then theres a problem, either your selling too much to someone, or selling to someone who shouldnt be sold in the first place, but i have never done anything in insurance so who am i to say so..

 

[jacobtn]

why would you have chargebacks if you are taking comm as earned

 

[rousemark]

If you are loosing 25% of your business during the first year, you are doing something wrong.

 

[donamese]

10% should be an absolute max to lose in 1st year. So 10% should cover you for debit balances. If you are a decent salesman, you really shouldn't have to worry much since they will be minimal and if you keep putting through more policies, then those will pay off the balance anyhow.

 

[Josh]

If you figure a 9 month advance that means 25% of it is still with the carrier. If your keep writing business you should have plenty to cover it without "budgeting" anything extra.

 

[Rearden]

10%. LOL.

The average agent has like a 77% first year persistancy with FE business.

 

[donamese]

10%. LOL.

The average agent has like a 77% first year persistancy with FE business.

Your figures are from where? Mine are from pricing actuaries who base their assumptions of rates for carriers. 23% is closer to 3 years not 1 year.

If you are dropping 23% in year 1 you are either selling a high priced product where another agent is coming in and beating you on rates or you are overselling and the client is simply dropping their coverage because they can't afford it. If you fully explain the product and give them the best rate they qualify for and ensure the price is within their means, there is no reason you should lose almost 1/4 in year 1.

 

[Josh]

Your figures are from where? Mine are from pricing actuaries who base their assumptions of rates for carriers. 23% is closer to 3 years not 1 year.

If you are dropping 23% in year 1 you are either selling a high priced product where another agent is coming in and beating you on rates or you are overselling and the client is simply dropping their coverage because they can't afford it. If you fully explain the product and give them the best rate they qualify for and ensure the price is within their means, there is no reason you should lose almost 1/4 in year 1.

Are you talking FE, fully underwritten, or something else?

On term u/l your numbers make sense, on FE you're off. 10% is good, not the absolute worst.

 

[donamese]

Final Expense....I am not saying 10% is the worst. I am saying if you are selling well you should not exceed 10%. I know there are people out there with 80%+ lapse rates out there.

 

[TPAAgent]

Whats a chargeback budget?

F that

I've had my fair share of chargebacks like anybody else- however I'm experienced enough now to keep my stuff on the books a little longer

I never put any money aside and only had to cut one check to an insurance co to cover a debit balance...

My chargebacks (if any) come out of that weeks commissions

To be honest- I love it when a policy lapses after 9 months (prefer 12 months) but I'll take what I can get... Go out and rewrite that client through another company and get paid again

You're a salesman with an insurance license, NEVER forget that...- Now go out there and box them on the nose....