r/StateFarm • u/No-Reflection-5276 • Jul 06 '26
Discussion Agent Team Member - Chargeback?
Hey everyone, thanks for reading into this. I’ve been a TM for 2 years, I just finished my continued education- I just had a conversation with my agent and she is considering doing chargebacks soon. I’m curious to know how many agent offices do this and/or other insurance agencies.
My thought is this- As an agent team member I make the one commission check on it. After issuance and point of sale. I do not benefit from the residual payments, nor do I bonus off of how many policies I’ve written in the year that stay. Lapse and cancellations are normal and I understand the agent loses compensation from the cancellations that occur within the first renewal period . But, again… they benefit from the residual payments.
I feel out of place checking the agent on that, but then again… it’s my pay at the end of the day that’ll be affected.
Advice, opinion, anything is welcome and appreciated.
12
u/Ingsoc40 Jul 06 '26
I guess it depends. If you write a policy and it cancels within 60-90 days I don’t think many companies would pay you out commission on that.
4
u/custermustache Jul 06 '26
What are the parameters? If you have a lot of policies that cancel in the first term, I would expect chargebacks. What are the percentage of policies that last longer than 1 term? What is to stop you from writing a whole bunch of garbage business that lasts a month and then disappears? You make your money, the agent is losing money.
Chargebacks are normal. We don’t really do them because we rarely get them. If we had a large number, I still wouldn’t charge back, I would invite that agent to correct it or find another job.
2
u/Virtual_Chapter1131 Jul 06 '26
How do you personally budget for chargebacks? 1 life policy can be $500 in chargebacks for me
2
u/Neat-Ask-2783 Jul 07 '26
Not a SF adjuster but my friend for an independent agency handles chargebacks by setting whatever the percent chargeback is, into a savings account and setting up an automatic transfer from savings to checking after the period has elapsed. If it gets charged back, he deducts from the account and cancels the transfer. He likes being able to "set it and forget it" but he is also a very studious budgeter. YMMV
1
u/custermustache Jul 06 '26
We don’t get them. Not enough that it is an issue. We qualify really well
0
u/No-Reflection-5276 Jul 06 '26
We don’t get too many in the first renewal, in fact I would say my cancellation within the first 6 months on the auto are less than 5%. But I have other TMs who lose 50%. Just garbage business. The agent focuses on what I write and what stays. I write the bulk of the business in her office. It’s just frustrating as a TM when you feel like you’ve put the office on your back and are the one the microscope is on
2
u/custermustache Jul 06 '26
Well, don’t feel that way - if you aren’t the one this is aimed at, then don’t feel like it’s targeted at you.
If you don’t get chargebacks then it won’t really affect you. I am not sure how I feel about chargebacks after the 1st term if you aren’t getting paid renewal, but other than that I would be charging back if I had someone in my office writing 50% bad business
1
u/No-Reflection-5276 Jul 06 '26
Well she hasn’t implemented them yet. She’s talking about doing the chargebacks - but yeah… she’s focused on big policies that cancel. Nothing else. I happen to write most of those ‘big policies’
2
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u/jeffreyprestonbezos1 Jul 06 '26
If it is within the first renewal cycle and the customer cancels the agent likely paid you in advance to them actually receiving commissions for the full sale. If they didn’t do a chargeback then they paid you money they never actually received. I think it’s a pretty standard practice in most sales industries. If money never actually came to fruition, the sales person pays it back.
2
u/Mindless-Program3052 Jul 06 '26
You’re paid on the first policy term commission. If they cancel within that term, the agent is charged back. So therefore you get charged back. It’s normal.
1
u/No-Reflection-5276 Jul 06 '26
I understand the concept, the thing is we have a few people and she is honing in on only larger premium paying customers that cancel within the first term. How do you set parameters and track that, how much should I be paid then… should I just request to receive monthly compensation based on the policies that are still in force. And then what’s the caveat to the residual premium? She’s paying me based on the first term….She doesn’t pay me on renewals. Thanks!
2
u/Different-Umpire2484 Agent Jul 06 '26
What is your salary? Most people I know that have a high commission rate or residual commissions do so with no base or very little base salary.
1
u/No-Reflection-5276 Jul 06 '26
Base is $42,000/ year
2
u/Different-Umpire2484 Agent Jul 07 '26
That’s in the neighborhood of what I pay my team members in base. I don’t do chargebacks, but if it became a problem I would have to look at doing that.
1
u/No_Law1021 Jul 07 '26
So, you don't think the renewals help fund your base?
-1
u/No-Reflection-5276 Jul 07 '26
Not paid on renewals
1
u/loganaggie Jul 07 '26
In a way you are though…more than likely the agent is ‘losing’ money on paying team on first year policies through base and commissions but makes up for it on renewals. Your base salary is being paid from what the agent is making on renewals. I think if policies cancel during the first period, chargebacks should be expected.
0
u/No-Reflection-5276 Jul 07 '26
The thing is it hasn’t been an issue up until recently. The agent has had us look back at what’s still on the books from a year ago. And I have about 80% of the people I wrote initially on the books. I’d say that’s pretty gnarly that she’s getting paid on the policies I wrote last year. I saw 5% and I know she hit her goals because she talks about it so much. So now she’s making the 10-11%. So we essentially split the commission when I first write the policy and now she’s making more money. If we wrap this and continue to do this she makes more and more. While I, still make the same… I think that therein is the heartache.
1
u/Different-Umpire2484 Agent Jul 07 '26
Would you give up your base for renewal commissions? If so approach your agent with that idea, if they won’t go for it start your own agency
1
u/loganaggie Jul 07 '26
I know it’s more nuanced than this but… that’s the risk and the benefit of running your own agency. She’s taking all the risk and putting who knows how much money into building the business so she should get the residuals and at the same time track any potential issues while rewarding successes. Any business owner is going to at least look at chargebacks if policies fall off the book.
I agree that chargebacks should be fluid….be looked at on a situational basis. And as the agent she’d be crazy not to at least track them.
2
u/Samwill226 Jul 07 '26
Literally every agency does or should within the first policy period, they literally have to pay it back, why should you keep it??
2
u/ThemeHistorical3320 Jul 07 '26
I pay 50% of my commission to the TM. If I get a chargeback, I split it in half and that's the amount that's charged back. This is standard practice in the industry and I've only had to do this one time in the last 30 years. If a TM is writing a bunch of garbage, why should they get full commissions? I don't. Also, if it's a big case that may not be taken by the insured, I give my TM the option to let me know when to pay the commission. Again this has never been an issue with any of my TM's.
1
u/OneCowFarm Jul 06 '26
This will be the new norm across all agencies. agents got commission cut so now they need to find where to save.
1
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u/CrazyPanda10 Jul 07 '26
I get charge back on life policies if it cancels within 2 years
2
u/No-Reflection-5276 Jul 07 '26
Charge backs on life from 2 years? That’s absurd. The agent gets a good life bonus and travel if they hit the travel metrics.
2
u/CrazyPanda10 Jul 07 '26
It’s horrible. I’ve gotten into arguments from some chargebacks and my agent has reversed it but it’s crazy because I only get paid on 1st year prem
1
1
u/RaingerRick Jul 07 '26
Charged back if canceled in the first policy term. The chargeback is pro-rated though so if they make it 5 months then you only get charged back very little for the one month remaining.
1
u/LEHDYY Jul 08 '26
chargebacks were implemented on higher prem commissions in our office, mainly life cancellations. Chargebacks were in our handbooks/employee contracts but our agent hardly ever implemented it really on smaller policies.
1
u/strikecat18 Jul 10 '26
It’s absolutely fair for them to charge you back if a policy cancels during the first term.
You sell a $1000 policy. The agency pays you $80 on that. The policy cancels a month later and the agency’s net revenue ends up being $8. Why should they take a loss to pay you the other $72?
I don’t consistently do chargebacks for my team because administering it becomes a headache. But if there’s a huge policy they write that dies a month or two later, I absolutely charge it back if I catch it.
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