If there’s one thing the Iraq War taught us, it’s this: you always need an exit strategy. In this way and no others, starting an insurance career is quite similar to overthrowing Saddam Hussein.
All joking aside, let’s talk for a moment about how agent contracting works in the life insurance world. With a small number of exceptions, insurance carriers don’t want to deal with us lowly individual agents – there are way too many of us for them to handle. Instead, they “outsource” the job of working with agents to Insurance Marketing Organizations – IMOs.
IMOs typically have a number of “wholesalers,” also known as recruiters or General Agents (GAs). These GAs are the people who actually work with individual agents, meaning that there are typically at least two “layers of hierarchy” between the agent and the actual insurance carrier.
(In reality this gets much more complicated. IMOs can give one another contracts and get involved in each other’s hierarchies. IMO-A might be under IMO-B for one contract, but IMO-B might be under IMO-A for a different contract. Or maybe they all pool their production into a single contract, forming a “premium aggregator” to achieve higher aggregate levels of production and get better commissions and bonuses. The higher up the pyramid – yes, it’s shaped like a pyramid – you go, the weirder it all gets. We’ll just stick with our simplified hypothetical in this discussion.)
Everyone in the hierarchy gets paid when a policy is issued. For example, say you’re contracted to sell a certain product for a 100% first-year commission. Your IMO may actually have a 140% contract for that product, and your GA may have a 120% contract. In this situation, when you write a policy you’ll get your 100% commission, your GA will get a 20% “spread” above that (his 120% minus your 100%), and your IMO will get another 20% spread of their own (their 140% minus the GA’s 120%).
With that in mind, it’s easy to see why an IMO/GA would want to keep an agent once they’ve been contracted. If an agent moves their contract elsewhere, the “up-line” will no longer get paid on their production. However, you’re an independent agent – emphasis on independent. You should be able to move your contracts from IMO to IMO whenever you like, and for whatever reason. Maybe it’s a personality conflict with your existing GA, maybe you’ve gotten a better offer elsewhere, or maybe you just think it’s time for a change – doesn’t matter. If you want to move your contract from one up-line to another, you’re independent and should be able to do so.
However, in order to move your contract you’re going to have to do one of two things:
1. Secure a release from your current up-line
The IMO / GA you’re currently contracted with will need to “release” your contract to a new up-line. This must be done in writing, either through a form provided by the carrier’s contracting department or through a letter if no such form is available. If your up-line refuses to provide a release, you’ll have to move to option #2 – and you’re not going to like option #2.
2. Cease writing business for six months
If your up-line refuses to release you from a contract with a certain carrier, then your only recourse is to stop writing business with that carrier for six months. At that point, the carrier will release you themselves and you can place your contract anywhere you like. The problem with this is obvious – if you’ve got a couple of “core carriers” and want to release them all, this can essentially put you out of business for six months (or, at least, put you into a different market for that long).
This is why you must talk about releases with your up-line before signing initial contracting paperwork. If you don’t, you could be setting yourself up for a painful six-month lull down the line. Always bring this up before contracting. If your up-line isn’t willing to provide you a release policy in writing, it might be time to look elsewhere.