01
THE SOLE PROPRIETOR
Agent (01) had just completed their AHIP and was working on their carrier certifications. A few months before the enrollment season, Agent (01) experienced a stroke, which turned fatal a few days later.
MISTAKE
Agent (01) formed her business as a sole proprietor, and currently had no employees underneath them. Agent (01)'s spouse, was not a licensed agent, and was unaware that they could obtain a temporary license while they sorted things out. The spouse, desperately called on a former employee to get the business through the enrollment season. Although this proved good customer service, each new policy was written under Agent (01)'s name, who's license was about to expire. By the time this employee came to us for assistance, it was too late. The policy owner / Agent (01)'s license had expired, and all of the policies were absorbed by the carriers. The spouse was left with nothing.
CORRECT ALTERNATIVE
The spouse should have been aware that they would have only 6 months to obtain a temporary insurance license. At that point, the spouse would have bought himself some time to find an agent to sell Agent (01)'s business to.
02
CONTRACTING ERROR
Agent (02) employed an insurance agent who was contracted as an independent agent. The employee had all of their commissions assigned to Agent (02), so that the revenue was flowing into the business account.
MISTAKE
The policy owner can't be removed from a policy unless that policy is sold to another licensed agent. In this case, the employee is the owner of all of the policies that they sold will working for Agent (02). The employee can walk away and take all of the policies with them, leaving the business owner / Agent (02) with nothing.
CORRECT ALTERNATIVE
The principal owner of a business / Agent (02) needs to be contracted with all carriers that they plan to have their employees selling. Agent (02) would be considered an "upline" and would usually have their employees contracted as an "LOA" or licensed other agent underneath the business owner. This would mean that Agent (02) would be the owner of all policies sold under their business.
03
LACK OF KNOWLEDGE
Agent (03) was unaware of how the type of policy affects commission payouts.
MISTAKE
Agent (03) was under the impression that their business was bringing in so much revenue based off of the number of policies they sold over the years. Agent (03) was actually bleeding out their business, and had close to nothing left. Medicare Supplement policies almost always stop paying commissions or lessen the amount after 6 years.
CORRECT ALTERNATIVE
Agent (03) should have been managing their commissions by logging into their carrier portal, or should have been paying another qualified agency to partially manage their business. This would show Agent (03) that they were experiencing loss from the age of their policies, as well as natural loss. Agent (03) was not replacing their policy losses to break even, and especially not enough to grow.
04
TRUSTING THE UNQUALIFIED
Agent (04) began exploring the idea of selling their Medicare business. A little after a year, Agent (04) narrowed down her prospective buyers to a professional Medicare agency with an emphasis in acquisitions, and an acquaintance who was recommended by a friend. This acquaintance had a Health & Life license, and specialized in property and casualty.
MISTAKE
Agent (04) is at a stand still because they're conflicted about who to sell their business to. Agent (04) is older, and their health is declining at a fast pace. The acquaintance who specializes in P&C would need to obtain their AHIP certification, as well as all Medicare certifications prior to the date of sale in order to inherit Agent (04)'s business. The acquaintance would also need to become contracted with all of the insurance carriers that make up the block of business, and complete their certifications as well. Once this timely task is completed, the acquaintance would still be inexperienced in the Medicare realm, leaving them unqualified to take care of Agent (04)'s clients.
CORRECT ALTERNATIVE
Agent (04) should weigh out the pros and cons of each buyer, and look at the situation logistically. It is not always best to rely on a friend's recommendation (in this case- the acquaintance) when passing on your livelihood to another agent. The buyer needs to be in good standing and in a "ready to sell" state with Medicare at the time of sale.
05
BULLETPROOF MENTALITY
Agent (05) is 85 years old with a progressive debilitating illness. Agent (05) is scheduled for a major invasive surgery right before the enrollment season with no succession plan in place. The recovery and rehabilitation time following this surgery is expected to last a month or more.
MISTAKE
Agent (05) has no plan in place if they don't make it through the surgery. If the surgery takes a bad turn, or the recovery time is longer than expected, Agent (05) will not have enough time to complete their AHIP & carrier certifications. Each of these must be completed in order to keep the current business going, or all of the policies will be absorbed as carrier house account.
CORRECT ALTERNATIVE
Agent (05) should have put a temporary emergency succession agreement in place to protect their business, their revenue, and their spouse. This agreement would allot a period of time for a chosen agent to move the business properly over to them.
06
TAXATION CONFUSION
Agent (06) is ready to transition out of the insurance business. Prior to coming to Affordable Medicare Solutions, Agent (06) received an offer from an outsourced company to manage their business, and pay Agent (06) 30% of the commissions for 3 years.
MISTAKE
Agent (06) is making far less money by accepting a percentage of split commissions than they would if they sold the business at full market value. Also, when accepting a split of commissions, the revenue will be taxed as ordinary income. Taxation on a full sale will be treated as long term capital gains, which is a lot less than taxing at ordinary income.
CORRECT ALTERNATIVE
Agent (06) should take a business evaluation workshop with affordable Medicare Solutions, to learn the correct way to look at your business revenue. Another option would be to have an expert manage the business who will give a fair offer that takes business overhead expenses into account.
07
RETIRING OUT OF STATE
Agent (07) has started to build a house in Florida where they plan to retire in a few years, and take their business with them.
MISTAKE
Agent (07) was under the impression that they would only have to move their GA license to a FL non-resident license. Agent (07) will also need to go back and change their GA license to a "servicing status" within 30 days of the move to FL in order to receive commissions from their previous book of business. Agent (07) will then change the FL license to a resident licensee. The Department of Insurance in either state will require proof of residency. In this case, any document that shows the moment Agent (07) begins living in Florida, will allow them 30 days to change their licensing.
CORRECT ALTERNATIVE
Agent (07) would be better off selling their GA book of business, rather than obtaining a servicing status which needs to be updated each year. Agent (07) will not be allowed to change their GA client's policies or to sell any new policies. Agent (07) will only be allowed to service his GA client's policies, and to sell new policies in the state of FL.
