How Much Do You Budget for Chargebacks?

[Josh]

Look at AGLA's claim as to the cost of their NTOs and there is no commission loss on NTOs.. Most WL policies (Especially FE) have to stay for two years before the company realizes any type of return..

Apples to turnips. FE is different than most (if not all) of the AGLA portfolio. Very different critters.



donamese, are you going to answer my question? What is the basis for your claim that "However it is those people that drive pricing up on the final expense products".

 

[MGA]

It's real simple why any fe company changes underwriting or commissions. Profitability

 

[somarco]

why would they not check profitability of each product?

I never said that.

Go back and read my post again.

 

[rousemark]

Apples to turnips. FE is different than most (if not all) of the AGLA portfolio. Very different critters.

.

Not from the aspect of what it costs to do business as far as overhead, etc. The percentages might vary some from products but the principle is the same. In fact, I wonder if FE wouldn't probably have a higher acquisition cost than some other products because of eh large front loaded commissions.

 

[donamese]

It is just like Rousemark stated.

Take $100K in annualized premium. The company is paying 150% commission. Just on commission alone they are $50k over when they received. Each policy has to be printed, someone got you appointed, someone set up the policy, someone underwrote the policy, someone answers the phone, they all have offices which have rent and utilities, etc.

How do you figure the 60% that are left in force are paying down the 50K deficit + overhead expenses? It takes a long time to do that...throw in a couple claims and it is even longer. Seems pretty obvious to me, but if you can show me how 40% lapses in the first year are profitable, I would love to see the math.

It's real simple why any fe company changes underwriting or commissions. Profitability


This is true, but you don't seem to understand that the initial product is priced for a certain profit margin. If they are not hitting that or are losing which is typically for persistency or claims, then they have to adjust by either tighening underwriting (less claims), reduce commissions or increase premiums (higher $ in to counter the higher $ that has been going out). I guarantee Foresters wasn't pulling 10% profit and decided to shoot for 15% with their changes.

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Lapse ratio's and not taken impact the carrier retention costs but don't have that much of an impact on pricing of a specific line of coverage. In other words, the cost of these products goes against total overhead, but is not charged directly to a specific product line unless that is the only product the carrier writes.

That is how I read it.

 

[rousemark]

Rouse

Come on, you state in one post you never have had an NTO and then you state in another post you may have had one.

Read what I said.. I was qualifying the first statement in case I was mistaken. I said I don't "remember" ever having one.. It is possible that over 41 years I had one and have forgotten about it but I don't think that to be the case.

 

[MGA]

Rouse
I did read what you said.

It's clear to me that you must have not wrote much fe business.

It's impossible to not have an NTO in 41 years

No donamese you must not understand. It's called reality. When any fe company makes changes to underwriting. commissions etc it's for one reason PROFITABILITY.

 

[Josh]

donamese:

You're talking about NTOs though and other stuff that gets a *full chargeback*.

I'll ask for a third time, what is the source on your claim that "it is those people that drive pricing up on the final expense product".

You're making a fairly interesting claim and I'd love to see a source on this. Are you just making this up or do you actually have a source?

The NTOs at AGLA are different in a major way because they are actually underwriting the cases. SI is a very different critter. Aside from a quick med check and a light MIB, they aren't really spending the time underwriting it the way a fully underwritten company does.

 

[donamese]

Rouse
I did read what you said.

It's clear to me that you must have not wrote much fe business.

It's impossible to not have an NTO in 41 years

No donamese you must not understand. It's called reality. When any fe company makes changes to underwriting. commissions etc it's for one reason PROFITABILITY.

You are correct it is profitability. The product is priced for say 6% profit. If the product is actually losing money then you have to make changes to get that 6% profit. It isn't that they are hitting the 6% and change things to hit 12%.

And while it is unlikely that in 41 years to not have an NTO, it is possible. Keeping something on the books for 30 days isn't rocket science, it is just selling a good product to a qualifying client (qualifying as in they have financial means to afford it, not just can pass an app). An unfortunate instance will likely occur over that duration, but not always....he didn't say he has 100% 1st year persistency, only 30 days.

 

[moonlightandmargaritas]

If you pay your cable bill before your insurance bill, that is your problem, not mine.

somarco, as I am a newer agent, I was hoping you could help me with some clarification on your post.

When you say "cable bill", are you including services like Dish Network and DirectTV, or purely cable?