The Truth About Chargebacks

[Guest]

I hear many stories of agents fearing taking advances (which they need to survive) because of the dreaded and looming potential charge backs.

# 1: If you keep submitting new business, you won't be crippled by your charge backs so keep selling, don't get discouraged or lax. Now keep in mind, if you have over 50% or higher canceling after the sale/commission goes through, you're doing something horribly wrong.

*Remember, people who cancel, don't buy from you or don't return your calls are still ultimately buying insurance from someone/somewhere (in most or many cases) so what are you doing wrong?

# 2: How often are you calling the clients who cancel? Are you finding out why they did so, since it caused you a charge back?

*I know so many agents that do not call, and never even know what happened. Call them, you sold them once, why not try again? If you try to find out and they don't return your call, it may be proof that you did something wrong, they felt misled, they lost trust, etc. Or maybe someone undermined you (a scummy agent) and you'll never know. But if you try to find out, you'll likley be able to learn from it.

# 3: When you find out what caused the charge backs or see that you have too many of them, what are you doing about it?

*Meaning: Are you taking the time to learn more about the products? Seeking assistance in sales/training/support? Are you getting to know your market better? Praying?

# 4: Charge backs happen for a reason. I know I said this but I want to stress this point. It's not some random event and it's not always the client's fault. Yes, maybe some changed their mind or succumbed to buyers remorse on many an occasion, but certainly not 100% of the time.

*The more you can figure out why, the more you can prevent them in the future and you'll worry less and less about them.

 

[Newby]

Good info Rob.
The best thing that I ever did was create a separate bank account for reserves. Any sale that you take advances on you put 15% of the commission into the reserve account. When you have a chargeback you pay it out of the reserve (or pay yourself if the insurance company deducted it from you next check.)
Failure to do this is bad business planning in my opinion.

 

[iaminsman]

Great advice on opening the other account... going to go to the bank and will open that reserve account on Monday!

 

[Crabcake Johnny]

There are two main reasons for chargebacks. Although not totally unavoidable you can greatly minimize them:

1) Too pushy. Clients sign up when they're ready. The only thing that matters is they choose you when they're ready.

2) Signing up prospects who are broke. And many people have no problem telling you they're broke. Also, any decent qualification and using your 6th sense also tells you that they're financially challenged.

You can continue with these prospects, I don't: "When the premium coming out? Because today's the 6th and I don't get paid until the 14th."

Building your book on those kind of people is an accident waiting to happen.

 

[Guest]

One way to avoid them is to sell the plan that is best for the customer. This is often overlooked yet so important.

I hear stories about agents being advised to sell the carrier with the current bonus, or one where everyone gets a higher commission, etc. So bogus and bad for the long term, which is what this business is all about.

Great idea with the separate bank account, nice addition to the post, thanks!

There are two main reasons for chargebacks. Although not totally unavoidable you can greatly minimize them:

1) Too pushy. Clients sign up when they're ready. The only thing that matters is they choose you when they're ready.

2) Signing up prospects who are broke. And many people have no problem telling you they're broke. Also, any decent qualification and using your 6th sense also tells you that they're financially challenged.

You can continue with these prospects, I don't: "When the premium coming out? Because today's the 6th and I don't get paid until the 14th."

Building your book on those kind of people is an accident waiting to happen.

 

[Crabcake Johnny]

Another way to help curb them is to fully explain how the plans work. I've heard "salesmen" say thing like "oh, ER is covered."

To the average client the ER being "covered" means at the copay. I make sure I go over exactly what's covered under the copay outpatient services which fall under the deductible and coinsurance.

 

[Guest]

Like you still sell, LOL

Another way to help curb them is to fully explain how the plans work. I've heard "salesmen" say thing like "oh, ER is covered."

To the average client the ER being "covered" means at the copay. I make sure I go over exactly what's covered under the copay outpatient services which fall under the deductible and coinsurance.

 

[Crabcake Johnny]

....all the time; referrals and rewrites.

 

[Guest]

Ah, indeed.

....all the time; referrals and rewrites.

 

[scagnt83]

At NYL after 6 months if you where at certain production levels they sent you out to Dallas for special training and to meet some of the big shots of the company.
We met one of the companies top agents who did over a million per year in life premiums.
His measurement as to how the year is going, was by how much in chargebacks he has. It was June and he had $100K in chargebacks....and he said it was a good year!!
I could barely fathom that much in chargebacks!!

But on a normal scale, they are an unfortunate part of the business. But they can certainly be minimized.
Depending on what market I worked, I would be worried if my chargebacks where over 5-8% of my sales.