Insurance agents who get paid less than street level commission are usually working for an agency that provides leads, an office and administrative support. Agents who are direct to the carrier or direct to the FMO, are truly independent. They have to make it rain on their own and many struggle to survive because it is expensive to purchase or generate their own leads.
There is no such thing as a FREE lead
I often have agency owners tell me they don’t want their agents to receive our GM emails because they don’t want their agents to see commission information. NEWS FLASH: AGENTS CAN FIND THIS INFORMATION OUT ONLINE. Agents will find out what higher commissions are available and it is in your best interest to tell them now, before they are A) on the way out the door, or B) really mad & souring the rest of your team.
Every agency owner should have a plan for agents that want to leave
Any agent can talk a competing agency into a higher commission. This is because many agents, shall we say, “inflate” their production when talking to a new agency/FMO. Some blame must go the other FMO who courts them with the lure of a “top commission.” Just last week I had an agent request the MGA level commission–or he would move to another FMO. Our marketer wanted to “meet or beat the offer”, as is our procedure. But I had to step in and remind all parties that the MGA level with that carrier requires $250,000 in annual production and while we can submit the contract, the SVP at the carrier has to approve it and –here is the catch–will need to see proof of production.
Spoiler alert: the agent isn’t going to get the MGA level, not from us or from any other FMO on a direct contract
But here is the secret sauce: any FMO can pay an agent ANY level of compensation, as long as the agent assigns her commission to the FMO and he is NOT on a direct to carrier contract. 
Unless the carrier requires the FMO to pay commissions, and a few do (Silverscript, Clover, Envision, and allwell, Anthem and Humana requires the FMO pays the overrides) you must be sure that assigning your commissions comes with a value.
Are you getting lead support, marketing help, office space, etc. Or are you just assigning your commission solely to get a higher contract than the carrier would approve? If so, you are a fool. In the end, you will want to leave and you will not be taking any of your renewals with you. Only carrier contracts are vested. When you have a choice, you always want a direct contract! Period. Memorize this. Repeat it over and over. Call me if you have questions. 800-388-8342 x 314
The Problems:
- Agents get greedy by demanding higher contracts that what their production warrants.
- Marketers get greedy by enticing agents into higher contracts that eventually will be reduced by the carrier because, see above, the agent can’t meet the production requirement
- FMOs struggle to keep their agents in the face of the competitors trying to lure agents away with higher contracts that the agents can’t sustain and might match the competing offer.
- Carriers also lose because they spend money contracting, recontracting and then re, recontracting again when production requirements are not met.
How do we all avoid this merry go round?
With a frank, transparent discussion about compensation. Show your agents the commissionlevels, and explain how they can move their contract up with production and downline agents.
If you have a plan for agents to be able to move up the ladder–share it with them now, before they leave or threaten to leave, before they receive an email from a competitor touting the top SGA level commission for every agent, before their spirit is crushed because they think you are exploiting them!
Everyone should have the ability to grow their contracts. Show your agents how to become a GA, MGA, SGA, FMO, NMA, IMO etc. The requirements vary by carrier, so show your agents the commission sheets. I try to be very transparent with our agents so everyone knows they are not capped. They all have the chance to grow and we will help everyone move up the line.
Not everyone wants the responsibility of managing a downline of agents, and it is impossible with some carriers to move up the hierarchy without X number of downline agents. When I started in insurance it was very common for an FMO to give the top level contract out to agents with no downline agents, just because he liked the guy. This burned me up because we towed the line and showed agents the requirements to, for example, become a MGA. He would eventually come back to us mad because the rules were being applied inconsistently across the country.
One of the happiest days of my life was when UHC, the nation’s largest insurance company, cut the contracts of hundreds of GA, MGA and SGA who had NO DOWNLINE. All those levels require different and ever greater numbers of downline agents, yet unscrupulous FMOs had given away the top contract in direct opposition to carrier guidance. This made us look stingy instead of honest. In the carrier’s defense (and this applies to all carriers not just UHC) it takes a lot of time and costs a lot of money to monitor this. FMOs are paid to contract and follow the carrier rules.
Just because you may be able to find a FMO/SGA/MGA who offers you a contract higher than you can get anywhere else…prepare for the day of reckoning, when your contract is lowered. Ask yourself, is that the type of relationship you want to build your business on?