How Local Insurance Agents Are Taking Your Commissions

“But the local agent pays me $20.00 per customer…”

We hear this a lot.

Our response, “But how much does the local agent COST you?”

Every $20.00 a customer saves in insurance each month equals $1,000.00 more in additional purchasing power.

Yes, that $20.00 a month you make from the local agent is nice; however, you could have made hundreds of dollars more in commission by saving your customers money on insurance instead.

Look at it this way:

The typical salesperson sends about 5 customers a month to the local insurance agent and makes $100.00 a month total in referral fees. Meanwhile, if those 5 customers had used Fetch, each customer would have typically saved at least $40.00 per month on insurance when compared to prices from the local agent. At an average savings of $40.00 per month, each customer would have had an extra $2,000.00 in purchasing power at the dealership. For the five customers sent to the local agent each month, those five customers would have had a total of $10,000.00 in additional purchasing power that could have been spent at the dealership.

How does the local agent afford to pay you $20.00 for a referral?

That agent adds that referral money back into customers’ policies so that they can make it up in commission. How do you think your customers would feel if they knew that their insurance premiums were higher because of the money the agent was paying YOU?

For you, the salesperson, every $20.00 the customer can save in insurance gives the customer another $1,000.00 to spend at the dealership. If the customer saves $40.00, the customer has another $2,000.00 to spend. What is your commission split on $2,000.00 in gross profit? We’re certain it’s more than $20.00.

On the flip side of that equation — every time the customer asks you to lower the car payment by $20.00, the customer is essentially asking you to drop the price of the car by $1,000.00. How much is this costing you in sales commission when the price of the vehicle is reduced by $1,000.00?

The next time a customer asks you to lower the payment, you should ask the customer what they are paying insurance — then tell them “If I can help you save money on your insurance, do we have a deal?”

Insurance Rules & Regulations In Your State:

Equally as important — local agents pose a huge compliance risk in how they compensate salespeople.

Each state sets its own laws concerning referral fees and insurance. The moment a salesperson refers a customer to a local agent, the salesperson is now subject to the insurance laws in that state. It is important for you to find out the rules in your own state before making any agreements. Many states have laws governing customer referral fees that prohibit agents from paying for “sold policies” only. Agents having to make up for the loss on non-sold policies must charge more to those that are actually sold.

More Commission For Your Deals:

Local agents have no real incentive to find cost-effective policies and savings for customers because they usually do not have much competition. The more expensive the policy, the more the agent makes for himself. Limiting your customer’s insurance choice to a single carrier or single agent means it is highly unlikely your customers are getting the most affordable insurance. Fetch provides quotes from insurance carriers that are likely to compete on price helping your customers save more.

Summary:

  • The local agent may be risking the dealer’s license by paying the salesperson on a prohibited basis (per sold policy, variable lead fees, etc.)
  • Every $20.00 saved on car insurance gives the customer another $1,000.00 in purchasing power while at the dealership.
  • Local agent’s have no real incentive to find cost-effective policies and savings for customers because they usually do not have much competition for the customer’s business.
  • Fetch provides quotes from insurance carriers that are likely to compete on price — helping your customers save more.
  • If 5 customers use Fetch and each save an average of $40.00 per month, those customers would have a total of $10,000.00 in additional purchasing power that could be spent at the dealership. What is your commission percentage on an extra $10,000.00 in gross profit?
  • The next time your customer asks you to lower the price of the car, you should suggest that they instead use Fetch to try to lower the cost of their insurance. You’ll have happier customers and you’ll make more in sales commissions by keeping the price of the car where it should be.
  • Stop giving up all the dealer’s profit — make the insurance company give up their profit instead!