LIFE INSURANCE COMMISSIONS
AN EYE-OPENING HISTORY OF COMMISSIONS
Part One
By PHIL CALHOUN
W
hile commissions may not be the reason professional health benefits brokers chose this field, the beauty of persistent commissions is unique to our industry. Brokers enjoy the benefit of a sale that leads to commissions which are consistently paid, most often monthly. Over the years we’ve faced threats and learned valuable lessons. As our industry evolved through numerous changes, this rich history can be helpful to more clearly look at today’s challenges. Some of our current concerns are not as unique as they often seem. Why commissions? Understanding our current payment model and how it has evolved over time is a great launching point. Persistent commission payments are the envy of many professionals. Sometimes it is hard to explain to outsiders how recurring monthly commissions allow us to earn a consistent income. Commissions are a function of the market and arose because the nature of the business is complex—choosing the right insurance plan is quite complicated, and studies show that many people end up choosing a less than optimal plan when they solely rely on their own judgment. Brokers therefore must stay well educated to serve clients by matching them with appropriate medical plans offered by insurance carriers that require monthly premium payments. Insurance carriers need brokers to consistently support clients and usually prefer to employ an outside sales force. This gave rise to the role independent brokers play in medical plan distribution. Without this demand for highly skilled independent benefits professionals, commissions would vanish. It is because of this demand for talented
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brokers that we are able to build a business. And a business with persistent revenue has value. Why be a broker? A career based on health commissions works well for some people. Compare the income a health benefits professional can earn with other professions that require four years or more to earn advanced degrees and certification to get a job and move up the ladder. A teacher with four years of experience and a Master Degree earns $75,000 a year. A hospital-based physical therapist with a doctorate degree and four years of experience earns $85,000. A communications grad with a bachelor’s degree after four years earns $65,000. Compare this to a health broker who can reach $75,000+ annually when they work hard and continually grow their book over four years. Look beyond the four years and the health broker’s ability to work hard and increase commissions by more than a 5% wage adjustment annually looks very strong. Many professionals look at our industry and call our monthly checks “mail box checks” since as long as clients are pleased with the service received, they pay their premium and the checks keep coming. Looking back The history of health care shows how rising costs led to a need for health insurance. Rising insurance rates link to how broker commissions evolved. For newer brokers, this history may be so remote it is hard to relate to their experience today. A review of commissions can give all brokers the background
- CalBrokerMag.com -
SEPTEMBER 2019
