Question on Chargebacks

[RonSmith1984]

I dont plan to write policies with the intent of having them fall off but i realize that it is something that is just going to happen so Im asking so that i can be prepared for it when the situation comes up.

If you sign someone up, and after 6months they drop, do you get charged back the full upfront advance? or do you get charged a pro-rated amount?

Thanks

 

[GeminiGroup]

You will be charged back whatever portion, not earned...

Using the example you gave if you were advanced 6 month worth of commish you'd be square.

If you'd collected a 9 month advance you'd be down 3 months. because that last 3 months of commission that you were advance you never "earned" because you only had a client for 6 months.

If you sell properly and constantly this isn't really a big deal, as you'll have "new" business to offsite minor hiccups.

 

[RonSmith1984]

You will be charged back whatever portion, not earned...

Using the example you gave if you were advanced 6 month worth of commish you'd be square.

If you'd collected a 9 month advance you'd be down 3 months. because that last 3 months of commission that you were advance you never "earned" because you only had a client for 6 months.

If you sell properly and constantly this isn't really a big deal, as you'll have "new" business to offsite minor hiccups.

Thanks, I assumed it was like that but wasnt 100%...appreciate the info

 

[jdeasy]

Thanks, I assumed it was like that but wasnt 100%...appreciate the info

That's how it's supposed to work, but some companies have different rules. F&G used to chage back 100% if they didn't keep it at least 3 months. Shenandoah was the same. Foresters was charging back 100% if they didn't keep it 6 months. They have since changed that policy.

It's best to ask each company.

 

[rousemark]

An exception to what has been stated would be Settlers. You still would be charged back only the unearned portion but they pay commission a little differnt from most companies. They advance 70% of the annualized commission... But then, they go ahead and pay the additional 30% as earned each month.. So, if the policy pays 6 months and then lapses, you will be charged back 70% of 6 months commission.

 

[TPAAgent]

If you're writing consistant business, it wont matter much. I've been in it long enough to be prepared for lapses- you'll know during the sit down, some people I've walked out the door with app in bag and thought.. "This sh*t aint gonna last long.." turns out to be some of your best business... Like they use to tell me during my rookie year back in 98'

"Just out write your lapses"

If you write 1500-2000 grand a week, a $300 deduction from your comm wont mean much- get it outta the way and keep pushing forward

 

[GeminiGroup]

If you're writing consistant business, it wont matter much. I've been in it long enough to be prepared for lapses- you'll know during the sit down, some people I've walked out the door with app in bag and thought.. "This sh*t aint gonna last long.." turns out to be some of your best business... Like they use to tell me during my rookie year back in 98'

"Just out write your lapses"

If you write 1500-2000 grand a week, a $300 deduction from your comm wont mean much- get it outta the way and keep pushing forward

Well said....READ THIS POST AGAIN!!!......... RonSmith1984

Nothing beats writing business.

 

[Norwayguy]

Well said....READ THIS POST AGAIN!!!......... RonSmith1984

Nothing beats writing business.

And beyond writing business setting a small amoutn aside to cover you for those unexpected chargebacks....Yes I know the carrier will pull the money out of future commissions but just knowing you have a couple months expenses available will make you breath easier....That and eventually moving to as earned makes for a very steady income.

 

[ims01]

Every carrier has a different policy on this. Some will chageback 100% if the policy lapses in the first 12 months. Others do 100% if lapsed in the first 6 months and 50% if lapsed in the second six months. A few chargeback 100% if lapsed in the first three months and pro rated after that. Even if you are paid as-earned, these rules apply.

This is just one more consideration when placing a questionable case.

 

[theinsuranceman]

Every carrier has a different policy on this. Some will chageback 100% if the policy lapses in the first 12 months. Others do 100% if lapsed in the first 6 months and 50% if lapsed in the second six months. A few chargeback 100% if lapsed in the first three months and pro rated after that. Even if you are paid as-earned, these rules apply.

This is just one more consideration when placing a questionable case.

WRONG! When paid "as earned" lapses are NOT charged back.