How Much Do You Budget for Chargebacks?

[djs]

Never met this Eli guy .....

You were before his time......

 

[rousemark]

Who you calling old guy?

FWIW, and I don't write FE, mostly major med (and now Medigap), I can't remember when a client refused an offer from a carrier.

I have had more than one where I felt the offer was not a good one and I suggested they refuse it, but can't say I have had a client refuse the policy when I encouraged them to take it.

Of course I am not as old as Rouse, but I am gaining on him.

I did clarify it to say that I had never had a issued policy returned NTO. If it is a rated or ridered policy then it is not considered as issued until the client accepts it. I have returned counter offers as Not Taken.. But None of them were FE. As a general rule FE polices are going to be issued as applied.
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So, just so we're clear.... HOW MUCH should a new agent set aside in the beginning if he plans on writing primarily FE insurance?

Companies expect you to retain at least 75% of your business the first year.. That is the reason why the most many of them will advance is 25%. If you maintain 75& or more it will not be necessary to put anything in reserve for that purpose. Personally I would never take more than 50% on advance but that is just me.

The main concern you should have is putting an amount in reserve in case you have a bad month or two.. Makes it easier to sell when the wolf is not at the door waiting on that next advance to come in.

 

[donamese]

You're ignoring a lot of facts here.

Fact 1: Insurance companies make money by investing the premiums while they have them.

Fact 2: That whole chart is ignoring that the premise of your argument is flawed. If the folks aren't keeping the policy past 30 days, your chart doesn't even enter into the discussion.

Fact 3: I think this is the biggest fact your ignoring, your claim was that policies that fall off the books before 30 days (the ~$200k in premium in the example of the producer that did a little over $500k in production) were raising the the cost of FE insurance.

Again, you claimed that the guys writing business that fell off the books in the first 30 days were a driving force in the way premiums were going up. That's the fact I'm questioning and looking for you to support.

Ok, you are absolutely right Josh, and thank you for your demonstration of how 60% persistency is profitable. Lapses and NTO have no bearing on premiums whatsoever. Interest rates are also at an all time high so insurance companies are making a killing! You do realize that this type of pricing is done in a program that won't just display everything pretty on 1 page right? It brings in varied sensitivity, interest rate s, mortality, all the overhead costs, calculates on a moving basis as well over years and thousands of lives, street level direct producers as well as gross production, etc. I thought I was doing you a favor by leaving out mortality where 1 death in that scenario could easily be an additional $25K in deficit to the premium.

MGA - According to the actuaries I speak with, around 5 years it will break even then profits rise from there.

 

[rousemark]

You were before his time......

I knew Bob was older than me.. I remember Eli well... and his brother Peyton and daddy Archie.

 

[GulfCoastIns]

If they're writing good business, nothing. Just sell it right and sell enough and it'll be a non-issue.

Thank you Josh, trying to weed through the banter here. I'm just getting started and the word "chargeback" scares me. I am a personal friend of the OP here and have been following this post as it is an issue that I wanted clarity on. It appears that both he and I were over thinking things. We planed on taking a 1k paycheck weekly, banking a 10k as a chargeback fund, and going as earned after year 1 but from what you guys are saying this might be overkill. I guess better safe than sorry. Thanks again for all the info and I look forward to grilling you vets for more! lol


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Companies expect you to retain at least 75% of your business the first year.. That is the reason why the most many of them will advance is 25%. If you maintain 75& or more it will not be necessary to put anything in reserve for that purpose. Personally I would never take more than 50% on advance but that is just me.

The main concern you should have is putting an amount in reserve in case you have a bad month or two.. Makes it easier to sell when the wolf is not at the door waiting on that next advance to come in.

Exactly what I plan on doing, but I guess my real question is how much? I plan on writing 4k a week(lofty I know considering I am just starting, but I think I can get there with training, persistence, and help from you guys on here! lol shameless I know) With that said assuming a 15% drop off rate, I should be saving $600 a week. How many weeks should I do this for?

 

[MGA]

donamese
5 years is about correct. As for interest rates at an all time high and insurance companies are making a killing on investments is totally false. Interest rates are at an all time low which in return means the company is not hardly making anything from their investments.

 

[donamese]

I know the interest environment is at an all time low, I was being sarcastic in reply to Josh stating:

Fact 1: Insurance companies make money by investing the premiums while they have them.


I know insurance companies make money by investing the money. A $30 premium invested for 2 months doesn't amount to anything even if you could get a 15% return. ​

 

[jdeasy]

TINS
I have no problem with Rouse. I will even state that I am sorry if I came across in the wrong way but i don't want any new fe agent to believe that they will not have any NTOs. It's just real hard to believe that in 41 years he has had no NTOs and when it's stated that he was a debit agent and never had an NTO that sounds even more hard to believe.

I am in agreement with you that it would be rare for an agent to not have any NTO's as an FE agent.

I don't get many anymore. In fact I can't even remembe rthe last one. I know I haven't had one this yhear. I do remember one about a year ago where I had to use the "think about it" close hard to get him to sign. He didn't take it once issued and I wasn't surprised. I hate to use that close and rarely do anymore.

As hard as it might be to believe, if rouse said he hasn't had one, he hasn't had one. It's really that simple. He may be a crudgetity old fart but he is an honest crudgetity old fart.

 

[Josh]

I know the interest environment is at an all time low, I was being sarcastic in reply to Josh stating:

Fact 1: Insurance companies make money by investing the premiums while they have them.


I know insurance companies make money by investing the money. A $30 premium invested for 2 months doesn't amount to anything even if you could get a 15% return. ​

That's not what we were taking about though.

 

[donamese]

It's ok Josh...you disagree, that is fine. You can't prove 40% lapse/NTO is profitable and I can't prove otherwise because neither of us have actuarial software. I at least put numbers on paper which is more than you have. As Rousemark had mentioned, companies terminate for poor persistency and it is a factor for qualifying on many incentive trips, so I am sure you are correct and I am wrong.