Is It Better to Be Paid "as Is" or Advanced?

[lqdirect01]

What? That makes no sense. Why would you want to wait to get your money?

If you're worth your salt then your persistency should be above 75% (really, 85%-90%), so going with a 9 month advance would mean no chargebacks. If you're a little concerned about it, go with a 6 month advance.

I have enough in as earned commissions paid to me every month to meet all of day to day expenses and leads. It is also nice to know that if I take a vacation for two weeks there will still be income coming in.

 

[thuban]

I have enough in as earned commissions paid to me every month to meet all of day to day expenses and leads.

Rishi,

How long did it take you to get into the black?

SP
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I make enough per month "as earned" to cover everything and have plenty left over.

Briko,

How long did it take you to get into the black?

SP

 

[lqdirect01]

It took me a almost a year to pull it off

 

[Josh]

I have enough in as earned commissions paid to me every month to meet all of day to day expenses and leads. It is also nice to know that if I take a vacation for two weeks there will still be income coming in.

Clearly you have either a loose understanding of how finance works or a lack of self discipline. There is no harm in taking the advance and putting any unused portion of it in an interest earning account if you have no use for it.

One KEY component to the whole thing is that starting off requires marketing and marketing costs money. If you're not taking the advances, you're trying to do this with your hands tied behind your back.

We'l just use FE for an example, but it applies to any product I can think of at the moment.

Rough numbers:
4,000 piece mailer costs $1,250.
1% response rate = 40 leads
40 leads=10 deals @ average in $600 ALP = $6k in total premium.
$6k in premium X 100% (easy math) = $6k commission X 9 month advance = $4,500.
Bottom line, paid $1,250 for the month, yielded $4,500 in FY even if 25% of the business fell of the books and no chargebacks.
All the numbers stay the same, but no advance means you paid $1,250 to make $500/month. It will take 2.5 months to recover the marketing costs (assuming everyone you mailed was next door and you had a free phone and zero office expenses) which means you're down $750 for the month.
How many months in a row can you afford to lose $750 and still be able to live the lifestyle to which you've become accustomed?

A new agent (or old agent for that matter) not taking an advance is a mistake.

 

[insuranceexec]

If you're worth your salt then your persistency should be above 75% (really, 85%-90%), .

Which product line?

 

[thuban]

All the numbers stay the same, but no advance means you paid $1,250 to make $500/month.

Medi,

Yes, but if your production stayed the same, wouldn't it look like this:
1st month income 500, 2nd 1000, 3rd 1500, 4th 2000...12th 6000, etc. while your expenses stayed the same. Pretty soon you'd have a significant and steady monthly income with no "debt" and never a chargeback.

SP

 

[JCK818]

Yes, but you need capital to make the 500,100,1500 happen

 

[theinsuranceman]

Clearly you have either a loose understanding of how finance works or a lack of self discipline. There is no harm in taking the advance and putting any unused portion of it in an interest earning account if you have no use for it.

One KEY component to the whole thing is that starting off requires marketing and marketing costs money. If you're not taking the advances, you're trying to do this with your hands tied behind your back.

We'l just use FE for an example, but it applies to any product I can think of at the moment.

Rough numbers:
4,000 piece mailer costs $1,250.
1% response rate = 40 leads
40 leads=10 deals @ average in $600 ALP = $6k in total premium.
$6k in premium X 100% (easy math) = $6k commission X 9 month advance = $4,500.
Bottom line, paid $1,250 for the month, yielded $4,500 in FY even if 25% of the business fell of the books and no chargebacks.
All the numbers stay the same, but no advance means you paid $1,250 to make $500/month. It will take 2.5 months to recover the marketing costs (assuming everyone you mailed was next door and you had a free phone and zero office expenses) which means you're down $750 for the month.
How many months in a row can you afford to lose $750 and still be able to live the lifestyle to which you've become accustomed?

A new agent (or old agent for that matter) not taking an advance is a mistake.

I agree. I've been selling FE 11 yrs. and still enjoy advances (interest free loan).

 

[somarco]

It comes down to what you can afford to do and if you are comfortable with as earned.

Once I left the corporate world I went as earned and never looked back. The only time I took advances was on a World contract through AHU. Once I figured out their game I told them to change me to as earned. Eventually I stopped writing business with them and even though my "debit" balance was cleared they stopped paying my residuals.

That taught me two lessons.

Never take advances, never deal with an MGA.

 

[briko3]

Another factor you guys aren't including is the "wife factor". My wife likes to know that a "pay check" is coming in. It doesn't matter if I close a $10,000 case this month if next month I don't make that much. With "as earned" it becomes steady and makes her feel better.

In the end there's no right or wrong way to do it...it's all personal preference.