Insurance Agent Contracting – Direct Or Not Direct?

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This question has been asked of me many times by insurance agents over the years. I have also participated in many online forums on insurance where I’ve witnessed some biased opinions. Let me share my opinion on the subject of whether it’s better to contract directly to an insurance carrier than to an MGA (Managing General Agency) or IMO.

Many MGA’s and IMOs in the country offer very high quality (vested), services, incentives, and support. These additional services, incentives, and support would not be available if you were directly contracting with the carriers. Weekly webinar sales and product training are two examples. Although most insurance companies offer product training, it is nice to have more information and access to a range of professionals who are experienced in the insurance industry.

Incentives trips are another option. Assurant is an example. Agents are not eligible for sales incentives trips. Many of our agents who have been contracted to Assurant have enjoyed all-inclusive trips over the years. This is in addition to receiving 20% and 25% fully-vested commission contracts with optional advancement. Agents who have been offered sales incentives trips by carriers such as American Community, Golden Rule, World, or American Community have often been eligible for two trips with the same sales premium (the carriers’ and ours).

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Quality MGA’s and IMO’s can offer other great value-added benefits (I know they do), such as underwriting, product and quoting support and lead credits. They can earn as much or more commission than they would if they were directly with the carriers. They are paid direct from the carriers for 98% of their products, just as if they had been contracted directly with them. They know that they can request a release to direct contract to any carrier at any time. Because of the above reasons, they choose not to do this. It is important to ensure that you are vested in your block of business under either the MGA and IMO. If you decide to modify your contracts, your renewals will follow you.

Golden Rule is another reason why agents prefer to do their GR business with us rather than directly to the carrier. They are paid twice per month via us. The amount paid directly to the carrier is one per month. They may be eligible for 24% commission on five sales per month (60 per annum) as opposed to 100 per annum direct. They can get a 9-month advance commission contract. They are only offered an “as earned” contract if they apply directly. Their GR premium is eligible for our annual sales incentives trips. It also qualifies them to receive any cash bonuses or incentive trips GR may be running simultaneously. They still own their business (are vested in it) and are free to move at any moment.

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Don’t believe that you should contract directly with the carrier. Do your research, understand the terms of the contract you are signing, weigh all the pros and cons, and then make the best decision for yourself. In the event that things don’t go as planned, it is a good idea to request an unconditional release from the MGA and IMO before you sign on. If they are trustworthy, you will be granted one. I hope it will help you in any decision you make.