Referral Fees

[insguy111]

We have a benefit agency that has approached us about referring us their clients for P&C. They currently hold a P&C license but only deal with benefits. We are considering giving them either a one time referral commission or possibly a lower commission on an annual basis.

Does anyone have an arrangement currently with a benefit agency? Do you reward them once and done or on an annual basis with each renewal? Any light you could shed would be greatly appreciated. Thanks!

[FurriePrincess]

First check your state regulations on legal compensation if the benefits agency isn't licensed for property and casualty as well as what the Department of Insurance allows or disallows as acceptable procedure.

[insguy111]

Definitely have to have P&C license - will need to confirm if they can receive any compesation based off the commission amount - thanks

[zekemsu]

Depending upon your state rules what about just paying them a "marketing fee" quarterly based on business secured and show some cross marketing like direct mail to justify.

[insguy111]

I hope to have an answer from the state ins dept shortly - if they are okay with it - I just wonder what would be a "fair" amount of compesation? 15% of commission annually while retained? 25% of commission one and done?

[St.CaptiveGuy]

Instead of paying them with referral fees, why not refer your benefits business to them and make your "payment" an exchange of referrals? Usually creates more synergy.

[insguy111]

agree - except we will handle small group benefits as well (growing part of our practice) - I have committed to referring larger groups over to them since they're out of our target market - but they are few and far between - thanks for the thought though....

[Rainmaker]

Lot's of options here.

Recommend a starting point is YOUR producer comp metric. If your metric is 20%, 25%, 35% the starting point is to match that and reduce by various factors. NEVER pay more than you would for an inhouse producer. Also, consider a 'sunset' to the arrangement. Most end after 4 years.

As far as 'trades' go with other firms....consider the first $50,000 of commission business being at Zero! After that the split begins....this creates an incentive for both firms to refer a good chunk of business initially so they can get past the threshold established and get compensated.....especially effective with agencies with multiple producers because leadership will support and drive the cross sell business so income can be derived.

Food for thought.

Good luck!

[insguy111]

Good ideas - thanks David!

[Rainmaker]

I live to serve!

Best of luck to you!