Producer Agreement/Contracts

[heavenly]

Can anyone give me a website address that would allow us to download a standard producer agreement that spells out commission splits, who owns book, etc? We are starting a new Commercial producer and need to have a good contract before we allow him to start.

[mccluney]

Wow. Just like today, there are no standard insurance policies. Insurance agencies have different objectives and goals. And to match a new producer and to motivate him or her is a real challenge. The investment that is made in the hiring and training process could be wasted with a "standard contract" Better to spend money and time with a good insurance specialized attorney to design a contract for your agency. Just my 2 cents worth.

[gregcw]

In general I have to agree with mccluney. I didn't go to an attorney that specialized in insurance but I did use my own locally to review the contract, which I wrote myself. using a company contract as a guide. I started out life, like many independents, with Farmers Insurance Group, and used that contract as my guide.

I have used it only once, ended up cancelling the contract, per the language in the contract, and the producer came back to me wanting his "contract value" paid to him. According to the contract he had a per-centage "ownership" in his book of business based on renewals along with a split of the commissions which we had agreed upon. The result was that he wasn't with me long enough to have any renewals and hence no "contract value" due him. Since he wanted me to pay him for his contract, I did have the contract reviewed again by my attorney, who agreed with my language in the contract and my interpretation that I didn't owe the producer anything.

This was nearly twenty years ago and since I have only had licensed employees and have just relied on Non-Compete Agreements and the fact that I own the book of business. That producer was part of the reason that I have never had another one. I do understand that a Producer would need to have a specific contract that addresses, that he/she is not an employee, responsibilities regarding unearned commissions, collection of earned premiums, ownership of renewals and also includes a Non-Compete agreement as opposed to just an Employee Non-Compete agreement.

Since that time I have had my Agency Personnel, Policies and Procedures Manuals reviewed by attorneys once, and my non-compete agreements when they were revised due to recent legislation regarding enforcability.

[JasonBHBCo]

This is too important of an issue to use something that is not tailored to your particular situation. There are too many variables that need to be considered when it comes to attracting, keeping, and developing quality producers. And, in most cases, the good producers are not going to come work for an agency that cannot offer some enticing options (ownership, stock, competitive commission splits, to name a few).
In the interest of full disclosure, this is something that our firm, B. H. Burke & Co., Inc., deals with frequently. If you are serious about putting together a solid producer contract, please do take a look at our website (www.bhbco.com) and give us a call to talk about your situation.
Regards, Jason

[Rainmaker]

We have the following inventory which might help you:

1) several producer agreement templates - small market, mid-market and large market - all disciplines. We also have templates for straight incentive, draw, salary + bonus, equity and buy out provisions. I think the most helpful though will be our cash flow templates - you can plug in the comp plan, your staffing, general expense, T&E metrics and 'game out' different production scenarios they may experience with you - we run it out for 5 years and include a calculation on your EBITDA during each year as well. Very important so not only you, but equally important, your candidate, can enter into this arrangement with all cards on the table and expectations have a better chance of being met that way.

2) Don't forget about onboarding: everyone does and it's so important. Onboarding gives them the best start possible. For a new producer - this program could include a training and activity management component so they get a good start by developing winning habits early on. For veterans rolling a book to you - having a strong onboarding plan for their first 12 weeks will help them roll-over a much higher percentage of business than without one.

3) Stick with them and support the living daylights out of them - trust me things don't always go as planned. Sometimes it's a rocky start - think long term and have a little more cash than you think you need. Agencies that hire producers and flush them in 6 months because they didn't have a handle on how the cash flows work soon find themselves gaining a very bad reputation in their local markets which impacts their ability to hire producers in the long term.

4) Lastly, and back to the issue of templates being used from an inventory, we're not a law firm. So we did create alignment with one who we have trained up on the 'ins and outs' of the insurance business as it relates to the different scenarios that naturally occur - and they can work with you on a legal document if you want to go that route as well.

All the best to you and good luck!