There are different types of agents, captive and independent or a hybrid of the two. How you contract with a company will determine a number of things: how much will your commission be, will you own the relationship with your client, how will you get paid. Let’s discuss each of these. How you contract with a company is important because later if you want to change, you will need to get a release which we’ll discuss later.
CAPTIVE AGENT
This guide is not designed for the captive agent. It is designed for the independent agent. A captive agent is one who represents a specific company and is permitted to only sell the products from that company. Companies like this could be a carrier like Humana, United Healthcare, Aetna or something like that. It could also take the form of working for an agency like State Farm or Allstate. If you work for an agency like that, you may have only a single carrier to offer to your clients.
If you are a captive agent, you’ll probably get very good training from the company, but you’ll only be able to sell that company’s products. You will only have one solution for them. Captive agents in most cases receive a salary from their company and/or resources (ie. Laptop). If they receive a salary, their commissions are significantly less than what an independent agent would receive. They may be bonused on how many applications they write and not paid “street level” commissions. We’ll discuss this more in the lesson on commissions.
If you don’t have a mentor or an agency to help you learn the business, this might be a good place to start. Be aware you contract may have a non-compete clause which could ban you from selling to your clients or even in the Medicare market for a period of time (could be 1-2 years). If you have to stay there a number of years to be vested, you will also want to know how long that is. Don’t leave before you are vested or you will lose all the renewals on the business you wrote. You have just shorted your earnings for a lifetime.
If you decide to be a captive agent, ensure you know the ramifications of that. The consequences could be significant. That is why we like to be independent agents. Not only can you offer more products to your clients, but you know you are providing them with the best solution to meet their needs.
INDEPENDENT AGENT
Being and independent agent means you can contract with multiple carriers to be able to provide the best solutions to your clients. This can take a couple of forms.
If you are completely independent, you have nobody to answer to except yourself. You can work from home and develop your business however you want to. This is the most flexible option. This is a difficult place to start. If you can find a mentor (agent already in the business) or an agency that will help train you, that is the easier way to go.
If you are totally on your own, you need to figure out who to get contracted with and how to get contracted. You’ll need to learn how to prospect, market yourself, find clients and how to build relationships. You’ll have to learn on your own how to submit applications, track them and fix problems. You’ll have to create your own presentations, marketing materials and deliverables (things you give to clients). You’ll have to manage your commissions to make sure you got paid correctly and will need to fix issues when they are wrong. You’ll need to develop a way to stay in touch with clients, track your clients and keep up to date with changes in the industry. This can be a lot when you are just getting into the business. You can see that senior insurance is more than just selling. It’s running a business.
You may find it easier to be more of a hybrid agent. Let’s talk about what that looks like.
HYBRID AGENT
A hybrid agent can take a number of forms. You can join an insurance agency. This will enable you to learn the ropes quicker. You’ll have a structure behind you to assist you in being successful. Many agencies will provide contracting assistance, training, marketing, leads, perhaps access to an administrative staff and most importantly mentors and friendships. Working by yourself, you don’t get a chance to interact with other unless you go to trainings and purposely seek other agents out to form relationships. Some more experienced independent agents, may be hesitant to do this as they may feel if they help you learn things, that you may “steal” business that they could have had. This is ridiculous as there are so many prospective clients out there, that there is enough business to go around. We have trained many agents and we are never fearful that we will lose business. If you build good relationships with your clients, they will give you referrals that KNOW you are the best. See our lesson on referrals.
There are different ways of getting contracted through an agency. How you get contracted may determine how much you get paid and who “owns” the relationship with the client. A Licensed Only Agent (LOA) means that the agency you work through is the agent for the client. You may be the writing agent, but the agency is the one who will get all the commissions. They in turn will pay you. When you contract this way, you need to understand what percentage of “street level” commissions you will be paid. You may be paid less than “street level” because the agency may be providing you resources, office space or leads. All of these costs the agency money, but it is because they want you to be successful and that is why they provide them. They will want to recoup their costs by taking a percentage of the commission. If you leave the agency, your contract will determine whether or not you are paid renewals and for how long on the business you write. Some contracts will say that you get no renewals if you leave. It is important to read and understand your contract if you are LOA.
Another way to get contracted with an agency is where you are contracted directly with the carrier. You will typically be part of a downline. This means you have an upline which is the organizations above you all the way to the carrier. You may be the bottom and have a GA (General Agency) or MGA (Managing General Agency) and FMO (Field Marketing Organization) above you. You may go direct to a carrier, which means there is no one between you and the insurance company, but these days, that is rare. Carriers don’t want to deal with every Tom, Dick and Harry out there. It is more efficient for them to deal with a few larger entities. If you contract this way, typically you receive “street level” commissions. Typically, these organizations get an override on the business you write for providing services and training to you. See the section below on uplines.
UPLINES – GA, MGA, FMO
Most carriers will not allow you to contract directly with them. In this case you will be part of a chain of middlemen. While this might not sound attractive, it is really efficient and will provide you with the support you need while not taking some of your commission. Smaller carriers may need help in marketing their products to agents and larger carriers need middlemen to buffer the amount of support they provide to agents.
General Agency (GA) and Managing General Agency (MGA) are very similar. A GA is an agency that has a number of agents in their organization. MGAs are like GAs but they have multiple GAs under them. So, there are two levels between an MGA and the actual independent agent. Each tier will get a slice of the total commission a carrier pays. The agent will still get “street level” but each of the tiers will get an override. This is money the carrier pays on top of the agent commission. Each of these tiers are expected to provide a level of value to the agent. This can include product and sales training, lead programs, marketing assistance, technology and contacting assistance. These organizations are considered your upline. They may get some percentage points on top of what you earn. This does NOT typically come from the amount you receive. Be sure you choose an agency that can provide you what you need support wise. You can obtain a release to go to another agency, but you would want to check with the policy for your agency. We will talk about releases a little later. It typically takes either a certain number of agents or a certain amount of production to become a GA or an MGA. Work with your FMO to determine what those requirements are.
Field Marketing Organization (FMO). This is usually to top tier. They contract directly with the carriers and offer appointments to their downline agents. You may go through a GA or MGA or you may go directly to the FMO. FMO’s can usually provide marketing support and perhaps if you have enough volume marketing dollars. Marketing dollars can help subsidize your marketing campaigns. We will discuss marketing more in the lesson on marketing and seminars. FMO are also tasked with helping you grow your business. If you want to become a GA, they can assist in helping you find agents and in understanding what all that means. See our lesson on growing your agency.
CONTRACTING PROCESS AND RELEASES
You must be licensed in any state you want to sell and be appointed in. Once you decide where you want to contract, then you begin the process. Most of the senior market carriers require you to get contracted AND certified to be able to sell the products. This is particularly the case for the MAPD and PDP products.
Contracting is also called getting appointment with the carrier. You need an appointment before you can sell their products. Before you can be contracted, you need to get your license. Our Lesson on First steps to becoming an insurance agent will walk you through that whole process. When you enter into a contract with a GA, MGA, FMO or agency, it is typically binding for 6 months or longer. This is a contract. Do your research on the agency you are going to contract with. Meet with them. Talk about what sort of support and services they will provide to you. Some agencies will give you a contract and nothing else. If you find out later that you don’t like them, it takes time and effort to switch. If they are willing to give you a release, that transition may happen sooner. You need to understand their releases. They may own your business when you leave or you may be able to take it with you. This goes back to how you contract with them.
READ the contract. This is a binding agreement. This is true of the agency as well as the carriers. Some things to look for are: release policy, vesting, payment of commissions, chargebacks, replacement of policies and other such things. They can be rather lengthy, but take your time to read each and every one. There was one company that said in their contract, if you replace a policy you wrote with them with another company, they would charge back the entire premium of the policy to your commissions. This is more than you made. Be aware of these sorts of things.
Contracting is a necessary evil of the business. It can be a pain in your behind. You have multiple page agreements with every company. They will want copies of your licenses, E&O coverage, voided checks for automatic deposit, tax forms and may require background checks. Most contracting these days is done online with electronic signatures, but some companies require paper contracts that you physically have to sign. Sending or faxing those in takes a lot more time in processing and lends itself to errors. There are a number of third-party contracting systems that most carriers are now using. It saves much of your information for when you contract with another company. Make sure that you enter the information accurately and honestly. It can take 2 weeks or more for your contract to get approved and for you to be appointed.
If you are working in the senior market, there are periods of “blackout” particularly near the annual enrollment period (AEP). The carriers will either not allow you to contract or they will not allow you to move your contract. They do this because it is a very busy time of the year and it takes away from their major selling and supporting efforts.
A few products are “First sale” contracts. You can’t get contracted until you have a piece of business to sell. Typically, this will apply to some of the life insurance business. The senior market carriers require that you are appointed and certified to be able to sell.
If you decide you want to change your upline, the quickest and easiest way is to get a release. You will request this from your upline. If they are willing to release you, they will send you a document that you send to your new upline. You will then need to go through the contracting for the carrier with your new upline. If your upline is not willing to give you a release, then it become more cumbersome. Some carriers will allow you to do an “intent to move”. With that, you send an email to the carrier telling them you would like to be released from your contract to work with a different agency. Usually, six months after that you are able to move your contract. That is six months where if you write business, it will be with your old agency. Depending on your agreement with them, they may not pay you the renewals. This means you have worked for free. Some carriers will allow you to move your contract right away if you have not written business in the last six months. This is where you need to understand the contracting for each individual carrier. They vary greatly. If you are thinking of changing your upline, you should make all the arrangement, ask for releases and send intent to move emails out as early in the year as possible so that all your new contracting is in place by AEP.
Some companies will have a contracting fee. This is a fee you need to pay by state to get appointed. Be aware of these fees if there is one. You need to determine if you will make more in commissions than the contracting fee. If there are fees, you may need to annually or every two years pay these fees. Make sure you have business on the books that support the fees, otherwise you are spending money just to be able to sell it and if and you aren’t recouping that money then you are losing money. Some carriers will pick up that fee and some will not.
Make sure that as you get contracted, you are keeping track of your agent numbers. We recommend having a spreadsheet as they are different and will need to be put on applications. You also need to keep track of all of your passwords for the agent portals and contracting links. You will need to change these periodically. You will want to track the logons for the secure emails, agent portals, material ordering websites, etc. It will not be uncommon for you to have pages of passwords. Keep track of the website, logon, password and any security questions in your password sheet. Make sure you update your password in the spreadsheet every time you make a change to it. This is just good data management.
You are an independent agent. That is a great selling point. Having said that just because you CAN offer any company doesn’t mean you SHOULD offer any company. Do your homework to make sure it is a good fit for you, your business and your clients.
Contracting is the first step to the process for selling senior market products. The next step is to get your certifications. Refer to our Lesson on First Steps to becoming an Insurance Agent. In that lesson we will cover getting certified.