An Assignment of Commissions contract allows producers to trade off selling their own book of business for more of a stable paycheck and support from an agency or MGA.
As part of an override arrangement, they generally reimburse their upline with a certain percentage back – this may include office space rental fees and marketing materials such as training sessions.
Lines of Authority
A line of authority refers to an insurance policy type. To sell such policies as life or auto, an agent needs to obtain a license specific to that line of authority. Individual exams for each line of authority vary; some states permit multiple exams at once so agents can quickly acquire multiple insurance licenses simultaneously. Some states even combine property and casualty products into one licensing category for easier sales.
LOAs are distinct licenses with separate exam requirements and differing compliance and regulatory obligations. Some states mandate continuing education (CE) requirements for all lines of authority while other only apply it to some or limited lines; an agent should therefore be mindful of any special regulations that might pertain to their limited line or they could face fines or other consequences.
Navigating the different lines of authority (LOAs) can be challenging for new producers, particularly since states vary in their definitions of major and limited LOAs. Furthermore, it can be confusing determining whether certain products fall under their LOA – for instance some states include auto insurance under personal LOA while other include it within property & casualty LOA.
While independent agents can sell any line of authority, captive insurance agents are limited to selling only policies available from their parent company. In exchange for this limitation, captive agents receive more support and structure such as office space and secretary services; additionally they receive an override percentage which helps cover expenses such as health and business insurance premiums.
As a new producer, it is vital that they understand all of their LOAs to ensure they are licensed to sell all of the products they wish. Otherwise, they could run into trouble with regulators or be unable to meet their sales goals. To make sure this doesn’t happen to them, consult an AgentSync consultant in your state who can go over all available LOAs with you and give you a clear understanding of which are covered under your license and which aren’t.
Licensed-Only Agents
Insurance agents may work for FMOs or operate independently and sell policies from multiple carriers. Some agents, however, only possess licenses to sell specific policies or lines – this category of agent is known as licensed-only agent (LOA) agent – while in some instances LOA agents may even be treated more like employees by receiving salary and performance bonuses rather than traditional commission payments.
Insurance carriers and FMOs often use agent hierarchies to outline compensation levels available to agents at each level and how much production must occur to advance to higher positions in an organization’s structure. This helps ensure they have enough salespeople and service staff selling policies to meet its goals.
An LOA agent typically becomes vested on their first day with the agency and annually thereafter. Most often they work under an experienced mentor agent who places them below street level but takes a portion of the commission as they assist their development. Once an agent meets company production goals and has established themselves with clients, they may be promoted up the ranks to street level or above.
Life and health, property & casualty and specialty lines of insurance products are often packaged into various LOAs to facilitate state regulation requirements. Selling these lines of insurance requires proper licensing from each state.
LOA agents typically can only offer products provided by their FMO, MGA, or large agency of choice, which limits their ability to compete in the market. Furthermore, captive agents don’t always own their books of business so moving between carriers may be challenging – this presents more of a problem for independent agents who must sell all of their products in order to earn a living; though in most cases their best agents can make up for this by offering an array of insurance products.
Captive Insurance Agents
Insurance can be an overwhelming, complex landscape filled with endless choices and terminologies. Understanding the difference between captive and independent insurance agents will make selecting an appropriate policy easier for you.
Captive agents work for one company and perform sales duties, client service and training under its brand. Captive agents have an in-depth understanding of their parent company’s products, policies and guidelines, coverage options and claims submission processes as well as ongoing support from marketing departments at their parent companies. Furthermore, these captive agents often do not need to worry about finding new clients, advertising costs or covering overhead costs themselves – giving them more time for relationship building and research projects with clients.
However, this exclusive relationship could restrict what products or services a captive agent can present to potential clients. Furthermore, their parent company could pressuring captive agents into selling specific policies or meeting sales quotas that may not always serve in their client’s best interests.
Are You New to Insurance Industry? Captive agents offer a great way for newcomers to enter the insurance industry as they offer steady sources of revenue and the security that comes from working for a large corporation. However, building trust among clients may be challenging when you only become part of the team on Day 1.
No matter which type of agent you become, state licensing requirements remain essential. Many states bundle similar products together to streamline training and exam requirements – for instance property and casualty (P/C) insurance products can often be found as one LOA while life and annuities typically form another one. Most agents require at least six licenses in order to cover every aspect of insurance: such as P/C products bundled as one LOA while life/annuities usually exist as separate LOAs – in order to have comprehensive coverage including P/C products as well as personal lines/commercial lines/annuities coverages/obligations etc.
Independent Insurance Agents
Independent insurance agents are licensed professionals that act like financial planners in protecting the assets and loved ones of their clients. Independent agents offer an attractive alternative to large agencies or online providers as they can tailor policies specifically tailored to your needs and budget.
Independent agents don’t limit themselves to working with just one insurer, so they have access to multiple policies from multiple carriers in order to find you the ideal policy that meets your unique needs. They are able to quickly show price quotes from various carriers and help you select a plan that best meets them – as well as offer solutions such as gap or supplemental insurance policies as needed.
As an independent agent, in order to become appointed with an insurance carrier selling products you want to market. When applying for this appointment, insurance companies will evaluate your agency’s finances, business plan, level of automation and history of carrier appointments in order to assess whether or not you would make an ideal addition to their network of agents.
Dependent upon the insurance company, you may receive either a desk fee, commission structure or another form of compensation. At the end of the day, it’s up to you to determine whether this amount is enough for your own investment and career development. Some firms will have vesting periods; wherein commissions become your property on day 1 with them. In these instances, an agreement should be signed stating how long it takes before full vesting of those commissions has occurred.
Notably, independent agents typically earn higher commission than captive or LOA agents as they’re working on behalf of their clients versus for an insurance company. Unfortunately, this doesn’t always translate to more competitive rates – which makes doing your research critical if you want the best possible deal on policies. If considering purchasing an expensive policy, hire a fee-only financial advisor or insurance consultant beforehand so they can ensure it suits your individual needs before purchasing it.