What Is An Insurance FMO?
Independent life and health distribution are set up in a system that is confusing to the point of being ridiculous. Each insurance carrier is free to get creative when setting up their own distribution chain. Constant one-upmanship results in a myriad of different terms being used to describe the same thing: the top of the channel, the largest distribution partner, s/he with the closest relationship to the insurance company, and the most downline agents. This is commonly known as a Field Marketing Office (FMO).
I am an FMO and this is my attempt to explain what our family business, Gordon Marketing, has been doing for forty years.
Every carrier uses its own designation and many refuse to use the term FMO, which has been commonly used for over 50 years.
For example, one of the nation’s largest health insurance companies wanted to elevate some FMOs to a higher level without hurting the morale of other FMOs. They created a new term for the very top of the hierarchy, known as the National Marketing Alliance (NMA). An NMA is an FMO by another name. But wait, they also have an FMO level, which is NOT the top of the food chain, but what was formerly known as the SGA (see chart below). Contrast that with the nation’s second-largest Medicare Supplement producer who calls their top-level partner a Marketing General Agent (MGA) and many ACA carriers call their top-level an IMO or Independent Marketing Organization.
Clear as mud, right? But wait, it gets more confusing!
Each insurance company chooses 5–20 FMO partners. Our company has top national contracts in Medicare, ACA, Life, Annuity, Dental, Short Term Medical, and Travel insurance plans. Some FMOs only distribute life, others only do dental. HERE IS THE CRAZY PART: anyone can call themselves an FMO! Many “FMO” offices are really only General Agents, with 10–50 agents. They call themselves FMOs to recruit the unsuspecting agent who doesn’t yet understand this industry. There is no easy way to discern if you are working with the top of the hierarchy of just a small agency with outsized branding. There are many people who put FMO in their name, but they are really just an agency. Does this matter? Not really. If you like them and want to work with them, do it. But I’d subtract points for their misleading name.
There is no standardization in the use of terms and this fact alone causes a big disconnect.
Everyone wants to be the top of the food chain, next to the carrier. Whatever that level is called by that company is equivalent to the FMO level. For the sake of this explanation, let’s just use the term FMO and assume we are talking about the top level of distribution.
Here is a sample Distribution Hierarchy:
- Insurance company
- FMO — 1,000+ agents
- SGA- 200+ agents
- MGA — 100+ agents
- GA- 5–50+ agents
- Agent -may be directly contracted to any higher level
The agent doesn’t get paid less by aligning with any level above him. The FMO divides up the override to all levels below him and the agent is paid directly by the carrier. Agents choose to work with agencies of various sizes because they have an opportunity to receive training, leads, marketing support, office space, administrative help, referrals, and other incentives. Or agents can work directly with the carrier and make the same commission and not receive any added perks. FMOs justify their place in the food chain by what services they offer. Everyone (GA, MGA, SGA) in the chain of distribution has to provide services to earn their override commission or agents will leave them.
There is nothing holding agents to these FMO relationships. Agents are free to contract with several FMOs or work exclusively with one or two.
If an agent isn’t getting service and support, he will move to an FMO where he can get more assistance growing his business. Most independent insurance agents have 5–20 contracts with various lines of insurance. Unlike a captive or career agent who is employed by a carrier and told what to sell and when to work, FMO agents are 1099 independent contractors who sell what they want, for who they want (a few or a lot of companies) when they want. They may sell only Medicare Advantage plans or they may also sell Life, ACA, annuities, and more. They decide what products they want to sell and the FMO supports their efforts to do so.
Insurance carriers find it more cost-effective to contract out the risk of recruiting and training agents to sell their products to FMOs.
Most agents never go into production or wash out soon after contracting. Insurance companies partner with FMOs that deploy marketers to build relationships with agents. These marketers are proficient in product knowledge and give agents the hands-on training they need to decide to add a product to their portfolio.
Key Point: FMOs are only paid when an agent sells a policy. FMOs are highly motivated to follow through after contracting an agent to get him trained, supplied, and motivated to sell, and keep selling in a compliant manner so his career grows and the FMO grows along with him.
FMOs build the relationship with the agent, he trusts us in a way that he never would a large corporate behemoth. Agents don’t have time to research the market and each new product that becomes available. Agents trust their FMO to do that research and make vital recommendations to the agents. A carrier will never tell an agent they are better off with a competitor, or that their customer service is worst in class. Carries tout their pros but FMOs are free to talk about pros and cons. We earn agent respect by being honest and transparent. If we are not, agents leave us. They are not our employees, they have choices and we have to earn the right for agents to work with us!
“Rogue” agents who are not well trained are a great liability to the carrier and the Centers for Medicare and Medicaid (CMS). Bad agents hurt the whole system, so having closer relationships with the agents we work with help our office to maintain very compliant agents and very low consumer complaints.
There is a love-hate relationship between an insurance carrier and its key distribution partner, the FMO.
The carrier does not want to PAY for another layer of distribution and almost all novice carriers conceive the idea that in-house employees are the best way to distribute their products. Yet, five to ten full-time employees cannot recruit and train a sales force, so the novice carrier eventually concedes that the FMO distribution model is the most cost-efficient way to quickly reach thousands of quality agents and move a product to market.
FMOs are not afforded salaries or benefits, they are actually the cheapest form of acquisition. But, carriers love to debate this because they refuse to factor in the lead costs to fuel their own in-house telesales operations. Dollar for dollar, FMOs are cost-effective and drive the majority of MAPD sales. Carriers spend millions of dollars on TV, radio, and print advertising to drive sales to their employed captive and telesales agents. FMOs spend their own money to teach agents who to prospect and grow their own lead sources.
Year after year, upwards of 80% of MAPD sales originate in the FMO channel. FMOs consistently outperform every other channel (captive, career, and telesales) all carriers also deploy.
Carriers pay FMOs about $100 per MAPD sale and would love to save that money by contracting agents directly to them. However it takes a lot of local support to maintain a sales force of 20,000–40,000 agents, and most carriers do not want to invest that money in a larger slate of full-time employees when they can pay FMOs on a per case basis.
For that $100 per sale, the FMO is responsible for managing thousands of tasks from as large as training agents about Medicare and helping them contract and pass their annual exams, to as small as making sure their website is compliant and they don’t have rebel flags on their business cards. FMOs are the back office of the independent agent. Most agents don’t have a staff. They are unsure how to order supplies (FMOs walk them through it or order supplies for them), they don’t know how to get their social media approved by the carrier, they are confused about the ever-changing regulations and need outreach to stay abreast of the state and federal laws.
In theory, agent CAN call the insurance companies directly when they have a problem. In practice, agents usually get a long list of phone prompts before they get to someone in customer service (who might be offshore and English is not their first language) who is then only able to type in a service request to “get back to the agent within 24–48 hours” with an answer.
Agents on the front lines need answers fast and are often in a house with a client when a question arises. They can’t trust the insurance company to give them the right answer when they need it most.
Our marketers give out their cell phone numbers. We take calls on holidays, weekends, and after work hours. We are motivated to get the agent the RIGHT answer as FAST as possible. The carriers prefer to have agent email their questions to a dropbox and wait, a few hours at best or a few days at worst, for an answer.
The very best attribute of our FMO office is we are licensed, active, sales agents too. We speak agent because we are agents. While the insurance companies hire people who have never held an insurance license or sold a policy and task them with teaching agents to sell. Agents have choices and they consistently choose to work with FMOs like ourselves, rather than directly with the insurance companies. We know their names, they are not just an agent number. We know their staff, how they generate their leads, what their pain points are, and how best to help them grow.
Sylvia Gordon and her sister, Rebecca, run Gordon Marketing, one of the nation’s largest Medicare FMO/NMA offices. They have a team of over 100 that train and support independent insurance agents in all 50 states. You can find Sylvia’s weekly posts on LinkedIn and the sisters' Youtube channel posts 2 training videos each week. Contact Sylvia at firstname.lastname@example.org or 800-388-8342.