Typical Commission Structure for Property Inurance Agent

[celmore]

I am thinking about getting the business and would like to know a bit more about how you get compensated on a commission only basis.

Thanks for any help you can provide.

 

[Air Jer]

Go work for an insurance company first in claims or underwriting.

 

[Josh]

Go work for an insurance company first in claims or underwriting.

I have to completely disagree.

That being said, I don't believe there is a "typical" commission structure. If you want to do p&c I'd take a look at doing CSR work first and then doing sales as well, that is if you're looking at personal lines. Commercial is a different game.

 

[celmore]

Thanks for the suggestions. My main business is commercial real estate. I have around 2.4 million SF of commercial property in the downtown Oklahoma City area that I represent and will continue to sale, lease and acquire real estate for my clients. I am wondering if it would be a good idea to get my license and sell my existing clients their policies. I sell on a average 5-10 commercial properties per year and could also possibly sell those clients their polices. Is this a good idea or just a pipe dream? Thanks again for your input.

 

[Josh]

Thanks for the clarification. I would suggest you talk to some of the local commercial guys and see what type of a commission split you can work out and do it that way. I would suggest that for a few reasons, the first is that if you've never done it before you can get into a little trouble and it'd help to have someone their to help (or do everything). Second is that most p&c carriers won't give out contracts to new agents, you have to go through someone. The other advantage to just doing a referral/commission split is that if for some reason the guys you're working with screw something up, even if it's not your fault, you can apologize to your client, keep the real estate business, and just help them find another agent without doing the proverbial crap where you eat.

 

[celmore]

Thanks Medicareplan, that sounds like the smartest way to not mess up my primary income. What should I expect as far as a commission. For example in real estate the high side commission is 6% and depending if there is another broker involved or the cost of the building for sale it will go down from there. Usually a property over 2.M will be listed for a lower percentage like around 3-4%. I have no idea how they structure the commission, is it one and done or monthly as long as they keep the policy or is it around 10% or 1% etc,etc. I hope I am not being a pain. vbmenu_register("postmenu_2

 

[Josh]

Thanks Medicareplan, that sounds like the smartest way to not mess up my primary income. What should I expect as far as a commission. For example in real estate the high side commission is 6% and depending if there is another broker involved or the cost of the building for sale it will go down from there. Usually a property over 2.M will be listed for a lower percentage like around 3-4%. I have no idea how they structure the commission, is it one and done or monthly as long as they keep the policy or is it around 10% or 1% etc,etc. I hope I am not being a pain.

No problem at all. With the commissions on commercial it's going to vary by product, company, and the contract the agent has. As long as your handing someone that will either sign up for whatever they're told or at the very least give it a fair shot and if it's reasonable go for it then a good starting point would be 50% of the commission. You'll have to start talking to an agent in the area, but that's what I would suggest. Give them a call or stop by and tell them your situation and say that you're thinking about getting licensed to do this (which you'll have to do to receive the splits), but you want to work with someone. Lay out exactly what it is you'll do (hand off the soon to be mutual customer) and that you'd like to get 50% of what's sold. He/she will say one of three things, yes, no, let's talk about it. There is no reason why a 50% split (and yes, it'd be monthly/yearly) isn't fair, but not all agents will see it that way. Odds of you being able to find someone who thinks that is a fair deal are pretty good. If the first agent or few agents you talk to don't want to cough up half the commission, keep looking.

 

[celmore]

Thanks Medicare, thats good advice, better to protect my primary income. If I do get into this what would be a good commission split? In real estate it is 6% and goes down from there depending on the size of the deal. Normally $2million or more gets cut to around 3-4% of gross sales price. Also is the commission one and done or do you get paid as long as the customer keeps the policy in place? I am trying to see what kind of money I could make and if it is worth my time or if I would be better just focusing more on my business.
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I didnt see my post go through sorry, so ignore the last one. Thanks for all the help.
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Hypothetically speaking, I sell a policy for a 10,000 SF building and the policy is just for the real estate not the business in it. The yearly premium is $10,000 or roughly 1% of purchase price of the building. What would a typical commission be and how long would I recieve it?

 

[djs]

Celmore -

There is a lot of variables, but to try to give you a straight answer, plan around 10% for most commercial liability policies and 5-8% if you write the workers comp. Of course, these could vary, but it will give you a starting point.

Lots of variables, but if you figure a $3000 a year liability policy, you will make $300 as a rule of thumb. It's recurring, so every year they pay the premium, you get a check for $300 (sometimes new business pays a few percent higher than renewals).

P&C is a volume business, or at least a premium business if you go for commercial. The costs of doing the business can outweigh the benefits if you look at 'job-sharing' with another full time job.

Even at a low volume, you're E&O insurance will run you $3500 a year, probably similar to your real estate E&O. So, you'll need enough annual volume to cover this and still make a profit. Commercial policies are a time/support headache if you don't focus on them. Clients will need certificates of insurance, lienholder changes, audits, etc. Not bad when it's your primary job, but again, a nuisance when job sharing.

Unlike MPS, I disagree with the commission split. Any agent that will give you a 50% split for a referral isn't an agent that you want working with your client. If you are writing the business, they usually give 50-80% commissions, but that would also involve some service work. (Caveat, some agents are willing to give 50% referrals if they don't pay on tails, they own the business and you get paid once, which doesn't get you a revenue stream).

Hopefully this helps some. Your hypothetical at the end, a $10000 premium would pay $1000 every time the policy renews. Commissions are almost always paid in policy increments (usually annual, some auto is 6 months), rather than monthly. If the policy cancels, you have to pay the commission back.

Most carriers pay commission monthly usually around the 1st. Always count 45 days after you submit the business to see the check.

There are ways around carrier appointments, sais.com, insurancenoodle.com, etc. You write through them, but retain the business for yourself (not a perfect solution, but a workable one).

Dan

 

[Josh]

Dan, great point about the e&o. Aside from the licensing cost, the e&o puts you in hole out of the gate quite a bit. With respect to the commission split, I'm slightly confused. If celmore wanted to refer the business with them ready to sign up for whatever the agent said, you think 50% is too high or too low?