Need Advice Expanding Our Agency

[DCooley]

My wife and I own an independent insurance agency in Florida specializing in life, health, disability, and fixed income annuities. We have been in business almost 3 years and ready to expand and want to bring on agents as independent contractors. Can anyone advise how to do this properly and compliantly? I am nervous about classifying them as independent contractors when they are acting more like employees for example. The positions would be commission only with extremely aggressive comp plans to make it worth while for them. As independent contractors, can I or should I offer them benefits like 401K, health insurance, etc?
Does anyone know typical E&O cost to add agents under our policy umbrella?

Any advice would be very much appreciated, thanks!

 

[plewi003]

Make sure you have a non-compete, two party agreement detailing comp structure. I don't offer any benefits to my agents, just a place to work and good commission structure. If you are just offering fixed products, E&O should run 1200-1800 per agent added. 1099s cannot be treated as employees so you can't make them show up to the office, or make them work certain hours. That is what you need to be careful of.

 

[DCooley]

Thanks very much for your advice. Is it possible for me to bring on 'work from home' agents as independent contractors, have them refer the business to me for me to close and than pay them a set commission percentage, say 75%? And then 1099 them at the end of the year?

 

[plewi003]

Thanks very much for your advice. Is it possible for me to bring on 'work from home' agents as independent contractors, have them refer the business to me for me to close and than pay them a set commission percentage, say 75%? And then 1099 them at the end of the year?

You need to make sure they are licensed in order to pay them commission. But you will be fine otherwise in this scenario. Just make sure you get the 1099s out on time at the end of the year to avoid paying a tax penalty for being late. If you have an accountant they will take care of for you. The only other downside to 1099s is if you want to add any benefits (health, 401k, etc) 1099s don't count as employees so they can't participate if you have these options for your employees. Good luck I pay my 1099s 70-80% but they service and sell the accounts. If they are just passing you the leads I would drop the split to 50%.

 

[DCooley]

Thanks again, this is a great forum for solid advice. One last thing, is it ok for 1099's to pass out business cards or other materials with our agency logo on them? I've heard differing reports on this, but if not allowed, don't see how companies like Aflac or State Farm get around this.

 

[plewi003]

Technically they could as long as they use their personal name, corp, LLC, or a registered DBA. I would not let them use any alias names that are made up. I just not would reference any carrier logos unless they use your business name.

 

[DCooley]

So for example the business cards could have LionShare Insurance Group (our agency), but just need to have their name and contact info? Can the 1099 reps say they are with LionShare Insurance Group at networking events as well?

 

[plewi003]

Yes they can do that no problem!

 

[SDCLife88]

You need to make sure they are licensed in order to pay them commission. But you will be fine otherwise in this scenario. Just make sure you get the 1099s out on time at the end of the year to avoid paying a tax penalty for being late. If you have an accountant they will take care of for you. The only other downside to 1099s is if you want to add any benefits (health, 401k, etc) 1099s don't count as employees so they can't participate if you have these options for your employees. Good luck I pay my 1099s 70-80% but they service and sell the accounts. If they are just passing you the leads I would drop the split to 50%.

50% just to refer business??? Where do I send my referrals!? That is an outrageous contract to give if all they are doing is referring and not anything else.

I run an agency of 7 people. they make 75% doing ALL the work...(beside prospecting, I supply the leads)

 

[plewi003]

There is no right, or wrong % as long as your ROI is good.