Why did I get this link sent to me?
Your upline received a letter in the mail or email, which you most likely have as well, notifying you/them of a debit balance with a carrier/multiple carriers, that has not been taken care of within 2 weeks. Your upline has sent you this link in order for you to understand how CHARGEBACK & DEBIT BALANCES WORK! First off don’t be alarmed as this is a normal part of the business and if handled properly, there should be no issues. BUT IF HANDLED INCORRECTLY OR NOT AT ALL, then their can and will be SERIOUS CONSEQUENCES that will occur in terms of your income, your ability to write business, and even your personal credit being at risk.
HOW DO CHARGEBACKS HAPPEN?: Chargebacks / Reversed Commissions, or what I would like to call monies that were advanced to you, that was not yours yet, and because the client did not keep the policy, you now owe that money back to the carrier that they advanced you, are a part of this business. Chargebacks are like your electric bill, they WILL come every month, and if they don’t come this month, then expect them to double up the following month. You can’t have the electric company generate your electricity for your house each month and NOT expect to pay the cost of doing it. Just as it would ridiculous if you owned a restaurant and expected NEVER to have returned food from a customer because they didn’t like it, or it was too cold or salty, or there was in a hair in it, or even expect food not to spoil or go bad, it would be just as silly in this business NOT to expect policies that you write, not to be excepted by the client or withdrawn due to non payment, or canceled within 9 months of writing it because they lost their job or fell on hard times, or they simply did not want it after all, etc. When you own a RST, the rule of thumb is to expect about 10-15% of your food to end up in the trash, and that is just from unsatisfied clients that sent it back! This is not counting the rest of the food waste that can total up to 30%. When you own your own Symmetry business the rule of thumb, when you are new, is to expect 20-30% of your business to get withdrawn, not taken, or canceled for some reason, prior to being on the books for 9 months. This does NOT mean it will happen to you all at once in the first month or even two, as I have seen many agents who didn’t see a chargeback for 3 to 4 months into their business, and if they were unprepared, they went OUT of business. This is a business and being prepared for what is to come is part of it. As you get better in the field and begin to get a better feel for your clients, the number of chargebacks will defiantly decline to as low as 5% with some agents, but until then prepare for 30%.
BE PREPARED: Set aside 30% of your commission that you receive from the carrier every time you are paid a direct daily deposit, deposit or transfer this into a separate chargeback account. When a chargeback occurs, simply call the carrier and pay it off with the funds you have already allocated and set aside to handle this part of your business. This is a cost of doing business that will always be here and will never go away unless you ask the carriers to pay you “as earned” commissions, which is them simply paying you your % rate times the monthly premium as your client pays. The best case is at the end of the year you look up in your chargeback account and realize you’ve overfunded it, expecting 30% and you were able to keep it as low as 15%. Well congratulations, you now have EXTRA money that you can either invest back into your business or something else that could potentially fund your chargeback account for the rest of your career. The worst case is that you have the funds to pay your chargebacks as they come in, allowing you to psychologically go into a home and actually do what’s BEST for the client, and NOT be thinking about what’s best for your wallet and that you need to write a different carrier that you don’t have a chargeback with, so you can get paid!
WHAT IS A DEBIT BALANCE? Debit balances are incurred when a chargeback happens, when commissions have been advanced to the agent and then the commissions are reversed due to non-payment of the policy, the policy is not taken, or the policy is canceled anytime between month 1-9 (the number of months you were advanced commissions for that policy.) Many agents ask how debit balances work in terms of agents having the ability to pay them back, how to pay them back, what happens if they do not pay them back etc. If you have been instructed properly by your upline and following their instructions in terms of managing your funds correctly, you should have a chargeback fund already set up where you are taking 30% of your advanced commissions and depositing them into a separate bank account. When you received this letter or realized you had incurred a chargeback, simply call the carrier and give them your credit/debit card information from that particular account and pay off your chargeback. If you are writing business consistently with a carrier, this chargeback/debt will erase as your commissions on your new policies you write, will pay off the debit balance. (the commissions that were paid to you from your older policies that charged back.) If you are consistently writing business with a carrier you do not have to worry about your debit balance and your most likely would have never received a letter as your new business would more than cover the chargebacks. When a chargeback occurs, please understand that NOT only the agent is responsible, but also the enrolling agent, the manager, the Agency Director, and whoever would be in between or profited from those commissions. With this is mind, every agent and manager should be aware of how this process is handled with each individual carrier.
No matter WHICH CARRIER an agent has accumulated a “Debit Balance”/Chargeback with, there are 2 MAJOR things that need to be COMPLETED since you have received a chargeback notification via email/regular mail, or your contract with the carrier CAN AND WILL BE TERMINATED, which will result in the inability to write new business until your debt is paid off, contracts with other carriers being TERMINATED, and your debt will ROLL TO YOUR UPLINE who will have to pay YOUR DEBT. To ENSURE this DOES NOT HAPPEN, please do the following 2 things IMMEDIATELY, EVEN IF you plan on writing business with the carriers!
Steps to Follow now that you got a notification of your Debit Balance:
- Call up the carrier and give them a debit/credit card and use your “chargeback” account fund that you have been instructed to set up and pay off your debt.
- If for some reason you did not follow that proper instructions from your upline/mentor, and you did not set aside money for chargebacks as instructed since you have been notified by the carrier you MUST SET UP A PAYMENT PLAN with the carrier. By setting up a payment plan with the carrier, EVEN IF YOU PLAN ON WRITING NEW BUSINESS, will ensure that your contract is NOT TERMINATED and that your debit balance is being properly accounted for and paid off. If you do NOT set up a payment plan, your contract can and will be TERMINATED causing the inability to write any further business until your ENTIRE debt is paid off, other carriers contracts can be terminated, your debt can and will roll to your upline, you will be put on VECTOR, the insurance carriers BLACKLIST which will prohibit you from contracting with any other carriers, and your personal credit will be put at risk along with being reported your States Insurance Commissioner who will have your license pulled. If for some reason
- Contract your upline to let them know how you handled your past due debt with the carrier. If this is NOT done than your upline will NOT know if indeed you set up some acceptable plan with the carrier to ensure re-payment and will have to assume you did nothing and will begin the steps to legally collect that debt themselves to ensure the carrier is repaid by YOU AND NOT BY THEM!
Again, this is a very simple process to pay off debit balances and there should be NO CONCERN unless you DO NOT FOLLOW the above 2 simple steps once receiving your letter or notification.
List of actions that will be taken if proper Steps are NOT followed:
- Termination of contract with the carrier, resulting in the inability to pay off the debit balance by submitting new business
- Termination from other carriers once they are notified of a debt you are unable to pay with a different carrier
- The reporting of your name and insurance license number to VECTOR, the insurance companies blacklist, prohibiting you from being contracted with any other carriers
- Your debt rolling up to your upline whose commissions will be debited for the monies you owed and did not pay, resulting in you receiving a letter from an attorney demanding re-payment
- Your personal credit being harmed
- Being reported to your State Insurance Commissioner to have your licensed suspended or terminated resulting in the inability to write ANY type of insurance with ANY carrier!