Ask the Health and Life Insurance Agent

Miscellaneous and Personal Stuff I Must Share
1

If ever there was destined to be a boring thread…

So, I left the SDMB for a while. When I faded into the mist, I was getting ready to finish up a couple of courses then go to med school. Life, as it likes to do, threw some extremely nasty curve balls at me, and I instead ended up as a $14/hour desk jockey for a while.

I quickly grew tired of that, and quit my job a few months back to start selling health and life insurance full time. Now, insurance salesmen are (I believe) widely regarded as near the bottom of the social ladder, and admittedly quite a few of us are ultra-sleazy. I thought an “Ask the…” thread would be somewhat interesting - perhaps I could help dispel a few myths that make my type look like the scum of the earth, while at the same time help potential insurance consumers spot the less ethical agents and the traps they use.

So, anything you ever wanted to know about how an agent operates? About the world of health and life insurance? What the sleazy underbelly is truly like?

2

Do agents have a certain quota to fill? Are they all on commission, or at some companies are they salaried?

3

I’m a former insurance agent, although I still have my licenses. I don’t mean to step on Soul’s feet.

Everything an agent does is intended to fill a quota. If you don’t sell, you don’t have a job. I have yet to find an insurance job that wasn’t on commission. Some are straight commission, meaning that if you don’t sell, you don’t eat. Some have a draw vs. commission.

Think of a draw as a bucket. When you sell, the commission you make goes toward filling that bucket. Your paycheck comes from that bucket. It’s a two-edged sword. It’s nice to get that paycheck if you have a bad week, but at the same time, you don’t feel like you’re getting anywhere. I saw people quit because they weren’t making any money even though they were selling a lot, and I saw people who had to take second jobs waiting tables to make the rent. It’s not an easy business, that’s for sure.

Robin

4

My feet remain thoroughly un-stepped-upon, MsRobyn :smiley:

I’m an independent agent (technically, a broker), so although I have contracts with multiple insurance companies I don’t have an employer-employee relationship with any of them. I’m a 1099 contractor, essentially. However, I got my contracts through an IMO (an Insurance Marketing Organization), which pools my sales production with about 1,200 other agents nationwide. Since my production is pooled, none of us have sales quotas to meet - the IMO as a whole writes more than enough business to keep the insurance companies satisfied.

I, like most agents, am 100% commission. I eat what I sell, and I don’t eat as much as I’d like. There are some places that will pay you a base salary plus x% commission, and some that will do it on a graded system: X salary year one, 75% of x salary plus 25% commissions year two, then 50/50, then 25/75, then 100% commission. And some places will just give you a training stipend of, say, $20k your first year to add to your commission. The disadvantage of these places is that you generally become “captive,” meaning you can only sell products from that insurance company. I, on the other hand, represent fourteen or so different companies, which means I can beat just about any captive agent out there on price alone.

5

How tied to a single company are agents/brokers? I have tried with three different brokers to obtain health insurance to no avail… they all tell me I am uninsurable. Even with a group plan (where one can’t be declined), the rates are so astronomically high that it is the same thing. (By astronomically high, I mean more than the monthly gross income of my company).

Are these people not telling me the full picture because there is no money in it for them?

6

What would your function be in a land with single-payer healthcare?

7

Your location has you listed as “Europe,” is that correct? If so, no clue - I’m only familiar with USA regulations. However, if you’re in the USA:

Captive agents are 100% tied to their company. Independent agents/brokers aren’t tied down in the least, although we all have our favorite companies to work with (in Georgia, for instance, Humana is an easier company to work with than Golden Rule - but GR pays better, natch).

Many brokers deal only with healthy folks (the policies are much easier to issue, and there’s less stress), while other brokers deal only with the less healthy (the policies are much more difficult to issue, but the commission is higher). Without knowing the details of why they’re saying you’re uninsurable, I wouldn’t be able to say - if you’d like, feel free to PM me and I’ll do some digging around for you. Keep in mind, however, that I’m only licensed in Georgia so any advice I can give you about your specific needs should be taken as the advice of a trained specialist, not as your personal agent. That also gives me a chance to clear up a common misconception: there are no “broker’s fees” or anything like that for working with an agent. You’ll pay the same premiums if you go to a broker, a captive agent, directly to the insurance company, or through a website like ehealthinsurance.com. The rates are set by law.

Bink, a single-payer system as I imagine it would play out in the USA would look very similar to a more stripped-down version of Medicare. Currently, Medicare pays 80% of eligible post-deductible costs for qualified individuals - I imagine that in a USA single-payer system that percentage would decrease slightly in order to widen the number of people the system could sustain. In that scenario, I think the role of the agent would shift to selling private supplemental policies, much like Medicare Supplements are sold today. As an aside on that note, MedSupps are supposed to be the easiest type of policy to sell - evidently, everyone on Medicare thinks they need more coverage, even though just the base parts A and B are probably better than anything they had up to that point. A single-payer system might actually make life easier for agents such as myself.
Edit: When I say the rates are set by law, I don’t mean that the government sets private health insurance rates. Rather, by law, the cost of a specific health insurance policy is the same no matter who you buy it from. Golden Rule Plan 100 at a $2500 deductible costs whatever Golden Rule wants it to cost, but that cost will be held standard across all of their agents, online, direct, etc.

8

I am American but moved overseas in 2002 because I could no longer get health insurance in the US. I have insurance overseas but am trying to move back… and finding I am still unable to get insurance, so I am heading overseas again in May and most likely giving up on the US. Humana might be nice to work with, but their letter of decline for me matches all the other companies. :frowning:

9

Certain states are guaranteed-issue states, meaning you can’t be turned down for coverage. I know Massachusetts is one, and there are three or four others…but I can’t remember them. There’s also http://coverageforall.org/ where you can investigate low-cost state-sponsored programs. You could try Health insurance and high-risk pools | healthinsurance.org and try to find a risk pool state (I’m unfamiliar with exactly how this works - Georgia doesn’t have a RP so I don’t do much work with them, and most brokers refuse to even discuss risk pool stuff because there’s no commission, just a $25 referral fee).

10

Is there much of a difference between insurance companies when it comes to commission rates? How does that difference come into play when recommending policies?

11

The way this works is as follows:

Take a client’s monthly premium, and multiply it by twelve. That’s the annualized premium. If an agent is on advanced commissions (like I am), you get 3/4 of your percentage upfront, and the other 1/4 after the first nine months. That percentage varies by company, but usually hovers between 17-22%. So, if you bought a policy at $300/month, I’d get about $540 upfront and $180 in nine months (on a 20% commission).

In month 13 and on, you start getting renewal commissions, which are usually 5% and are not advanced. So in month 13 and every month from there on out with this hypothetical, I’d get $15 for your policy.

Now, your question specifically was how the commission percentage plays into offering a specific policy, and I can say that (for me) it doesn’t enter into it at all. The average policy I write has a monthly premium of about $300, which is $720/year on a 20% commission or $612/year on a 17% commission (my lowest level contract). The difference of $108 over the course of a year isn’t enough to push me away from writing a better-fitting policy. When it comes to life insurance (which works the same way, except you’ll get anywhere from 80-125% of the first year annualized premiums and then 3%-ish renewals), however, I will almost always write policies with the highest-commission company. There’s just not enough difference in the products they offer to do any differently. $100k of term life is $100k of term life, and if the only difference is that I can make $400 off of one company and $600 off of another, then hell, give me the $600.

That’s not to say that I don’t have biases sometimes with what companies I use that have nothing to do with the client. I have one company that is notorious for paying me a month late, and when they piss me off I stop sending them business. I have another company that pays me very, very quickly and I will use them a little more when I find myself suddenly tight on cash. This isn’t a matter of slamming folks into bad policies, mind you - the quick company has great maternity benefits, so if I need quick cash I’ll focus my marketing efforts on finding folks that want that benefit in their policy. If I want to slow down my business with Slowpoke, Inc, then I’ll market towards older peopler because their rates are most competitive with the younger crowd.

A common trick new insurance companies use when they first open up in a state is to offer their agents commission levels of 35% or higher to entice those agents to write their business, and it works. Unfortunately, it often works too well, the insurance company can’t pay their agents on time, they get a bad reputation and then fold. I don’t know of a single reputable, established company that would offer a brand new agent anything more than 22% on health commissions, and 20% is closer to the norm.

12

I take it that’s on individual policies? I’ve heard commissions like that, but I work on the business side. Commission tends to run around 7% or so for a small business. (In CA that’s 2-50 people in the business)

13

Quite right. My personal niche is personal under-65 major-medical individual insurance. Businesses, or group policies, generally go without advances but with slightly higher “as-earned” commissions like 7-8%.

I actually have a two-person group I’m working with right now who, if they go through, will pay 8% as-earned. If their policy issues as expected, then I’ll make $40 a month on them. Their prices are slightly elevated because of a pre-existing condition, but group stuff is guaranteed-issue so they’re getting coverage no matter what.