Renewals that pay full commission vs. premium earned.
As a new agency navigating the sea of Insurance companies it is a daunting task. Not only is it important to give the client the best option but also what company pay the Agency the fastest with no drama. Charge backs are a way of life if you keep up a steady volume they take care of themselves so just write it right.
In my experience the only companies that have become a challenge are PSIC and Travelers. It is my experience that PSIC pays on an earned premium basis for new business and renewal. Travelers does pay up front on new business but on renewals they pay in 12ths if the client does't pay thier premiem in full. Even if the client is set up on EFT or automatic credit card withdrawal. I was shocked when I found this out. As a new agency it makes your cash flow a nightmare especially when business begins renewing from one year ago. This is especially difficult when you are expecting to be paid up front like the new business.
Lesson learned read your comp contracts. Ask your rep many detailed questions about how you get paid.
Travelers and PSIC are now the carriers of last resort for us.
Lesson learned. Has any one had this experience with other preferred carriers besides PSIC/Mcgraw and Travelers?
Since you are a "newbie", you should read the DOI statutes on trust accounts and the funds that should be in the account to be "in trust" at all times.
ANY commissions that are not earned are required to be in the trust account and not spent until they are actually earned. So, should you be audited by DOI, you can be cited for being out of trust if every dime of unearned commissions are not sitting in your trust account.
I have owned and managed agencies for over 30 years and had commissions paid both ways. The payment of as earned commissions allow for smoother financial statements and keep agents from spending money that is not actually theirs to spend.
So, by wanting commissions paid before they are earned, you will probably get yourself and your agency in a financial bind as retention will cause chargebacks and require continuously larger amounts of new business to pay back commissions spent prior to being earned.
I would suggest taking compensation as earned to stay in business.
Very good points! As far as being a "newbie" I have 14 Years experience of getting paid for policies I sell. The bulk of our sales are credit card or check over the phone only with six producers we opted not have them handle cash. This being our third start up we have learned to always maintain a three year cash reserve. So we plan far enough in advance to never have to face a financial bind. My point again is that Travelers and PSIC are the only companies we have that do this. Charge backs are a way of life in the insurance game but given enough volume they work themselves out. We have opted to only place Travelers and PSIC business as a last resort. It seems out of the 12 preferred carriers we have only Travelers and PSIC pay us this way.
Words of wisdom. READ THE FINE PRINT under compensation ON THE CONTRACT. We were excited about our Travelers appointment only to realize the looming bookkeeping nightmare. NO payment up front for renewals! I have a choice and I choose not to sell Travelers or PSIC. I want to share my experience with other agents about Travelers.
I prefer to stay in business by getting paid UP FRONT for business on the books. This is why I became independent to get away from these types of captured agent tactics. Side note: why would a company pay all up front this first year and hold back on the renewal going into the second. Sounds like corporate greed. If they did this on the front end no one would write business with these companies and they know this to be true. PSIC is a perfect example!
SoCalAgent77: Your post is a bit confusing...either that or I am just not reading it clearly.
Are you saying that the carriers you mentioned are paying in monthly installments when the client/insured has paid 100% of the premium at binding/renewal?
Or are you saying that when it is new biz the carrier had been paying 100% even when the premium was on installments and on renewal (still on installments) they are moving payment of your comm to installments?
Travelers (and several other carriers including Chubb) pay commission as the insured pays them. If the insured pays in full, then this is how we're paid. If the insured opts to pay in installments, that's how we receive commission. Many carriers do this and while it's tough to get used to at first, it does make sense from a trust account standpoint. Tough to spend money you don't have or have not recognized. It would be nice if everyone did it the same way but they don't. While I agree it's a pain in the tuckus to bill accounts like this, you do get used to it. For my territory, Travelers is exceptionally competitive and for us, not using a carrier because they pay commission in installments isn't a choice for us.
We have resolved the problem by adding two more new companies and making Travelers the last resort. This has allowed us to only have to place less than 20% of the business with them. This was recommended by an Agent that prefers to not have his name mentioned here. He agrees that Travelers makes it very hard to budget with the "as"earned premium renewal policy.
We switched to the new companies with comparable rates and features and have retrained our staff. We are happy to say problem resolved!
Not only is it important to give the client the best option but also what company pay the Agency the fastest with no drama. Charge backs are a way of life if you keep up a steady volume they take care of themselves so just write it right.
