Understanding Life Insurance Sales Compensation

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How Agents and Brokers are Paid for Selling Policies

By Dr. David Edward Marcinko; MBA, CMP™

By Hope Rachel Hetico; RN, MHA, CMP™

[ME-P Publisher-in-Chief and Managing Editor]dave-and-hope1

The recent AIG, and related insurance debacles, have prompted several of our cost-conscience doctor clients to rethink insurance agent sales commissions and related perks.  We trust this brief review is helpful to all concerned.

Life insurance company agents

Life insurance agents are appointed by the insurer with the authorization to solicit and deliver contracts of insurance. The agent’s power under life insurance is more limited than that of a property and casualty agent because an agent cannot bind a life insurance carrier to an individual risk, as opposed to a property and casualty agent who can bind his or her insurance company.

Agent Commissions

Agents are compensated primarily on a commission basis from the insurance company they represent. Compensation is higher for the first year a policy is in force. Thereafter, the agent may receive compensation for renewal—a percentage of the annual premiums—and much smaller compensation during subsequent years. If the agent achieves a certain level of production, the agent may receive additional bonuses or other types of compensation. Think: Million Dollar Round Table; or Million Dollar Club Producer.

Commission Rates

Commissions for agents typically run 50% to 55% on cash value products and 40% on term products. Agents’ commissions generally are lower than brokers because they are housed by the insurer, and therefore most of the agents’ expenses are reimbursed or paid by the insurance company.

The Fringe Benefits

The agent also receives fringe benefits from the company, such as health insurance, life insurance, disability insurance, a retirement plan, or a cafeteria-type plan. Usually, agents must maintain a specified level of first-year commissions in order to continue employment with the company.

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Life Insurance Brokers

A broker represents the client directly and can show illustrations from many different companies because theoretically there is no allegiance to any one particular company.

Dual Agent-Managers

Some brokers who may act both as general agents and agency managers (individuals who oversee an office of insurance representatives) usually earn commissions as stated above and overrides on first-year premiums to as much as 40%. There is a separate scale on renewals from the sales staff. These overrides are in addition to basic commissions earned either through the broker selling a product on his or her own or as manager of the office. In addition, brokers may earn subsidies for their office and production bonuses.

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Assessment

One advantage that life insurance agents have is that some direct writing companies employ only agents to represent them and sell their products. A broker may not have access to sell certain lines of companies that an agent does.

Disclaimer: Both contributors are former licensed insurance agents and financial advisors.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

Consulting for the ME-P

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By Ann Miller; RN, MHA

[Executive Director]solo-consultant

We would like to better understand who is visiting the Medical Executive-Post, and what you like, or do not like, about our blog site, print journal and/or communications forum. Most of all, we wish to know who is just visiting versus who is posting, commenting and subscribing; and why?

Assessment

Your responses are confidential, and will only be used for internal use to improve the website blog. We will not sell your information to anyone, ever!

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Please send in your considered responses to me at: MarcinkoAdvisors.@msn.com

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

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About the Convenient Care Association

Developing Best Medical Practices and Retail Operating Standards

By Staff Reporters

horizontal-nurses2The Convenient Care Association [CCA] is comprised of companies, medical providers and healthcare systems that provide patients and consumers with accessible, affordable and quality healthcare in retail-based locations. The CCA works primarily to enhance and sustain the growth of the convenient care industry through sharing of best practices and common standards of operation. It was founded in October 2006.

About CCA

According to their website, the first Convenient Care Clinics [CCCs] opened in 2000, and the industry grew quickly since then. Today there are approximately 1,060 clinics in operation, and CCA member clinics represent more than 95% of the industry. To date, CCCs have served more than 3.5 million patients with its nurse practitioners [NPs] and physician assistants [PAs].

Link: http://www.ccaclinics.org/index.php?option=com_content&view=article&id=4&Itemid=11

Growth and Expansion

With this rapid expansion, and projected continued growth, it quickly became clear that the shared concerns and needs of both providers and patients could best be served through an association that allowed for: 

  • Sharing best practices, common standards of operation, experiences and ideas.
  • Developing common standards of operation to ensure the highest quality of care.
  • A united voice to advance the needs of CCCs and their customers
  • A unified effort to promote the concept of CCCs, and to respond to questions about this evolving industry.
  • Reaching out to the existing medical community and creating new partnerships.
  • Building synergies with traditional medical service providers.

Assessment

The Public Health Management Corporation [PHMC], a nonprofit public health institute, provides executive management and administrative support for the Convenient Care Association. For more information, contact Tine Hansen-Turton at (215) 731-7140.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. Have you ever used a retail medical clinic and what was your experience? Will this business model save primary care medicine?

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

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Our Other Print Books and Related Information Sources:

Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Subscribe Now: Did you like this Medical Executive-Post, or find it helpful, interesting and informative? Want to get the latest E-Ps delivered to your email box each morning? Just subscribe using the link below. You can unsubscribe at any time. Security is assured.

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