For insurance producers, changing agencies might be as simple as signing a waiver. Other times, a producer changing agencies may leave the producer, agency officials, and even carriers with a legal maze of contracts, agreements, and state reports to navigate.
There’s a variety of reasons this is a tetchy subject—producers want free agency, carriers and agents need some degree of producer buy-in to maintain compliance and have a predictable distribution channel, everyone wants to retain commissions, states need accurate data on responsibility, and, somehow, consumers must be protected, as well.
Balancing these interests is no small feat. Let’s dig into the challenges of changing agencies, some practices stakeholders apply to mitigate issues in their distribution channels, and how modern hierarchy management can help carriers and agencies (but especially carriers) keep it all straight when they’re figuring out commissions.
Why do insurance producers change agencies?
For an insurance producer, there are many reasons to change agencies: Some agencies take a smaller-than-standard override on contracts, letting the producer keep more of the commission money in their pocket. Others have superior service options—like creative design services or a stellar digital marketing platform. Some agencies have technology that helps producers spend more time in front of clients and less time doing ticky-tacky compliance maintenance.
Culture is also a factor. For many independent agents, the agency is as close as they get to having a built-out team. Having an agency that makes you feel like part of a team can be a serious differentiator. And, of course, some agencies have exclusive relationships with carriers to be the single retailer for certain products.
Whatever the reason, a producer who’s looking to change agencies but keep their carrier appointments will have some considerations before jumping ship.
What do carriers require when their appointed producers change agencies?
Carrier requirements for producers who change agencies vary greatly from carrier to carrier, and also depend on the states where the carrier has appointed the producer.
This may not be a significant issue if the new agency has a completely different set of carrier contracts than the previous one. But, if a producer’s new agency has a contract with their old carriers, it may be difficult to get going under the new agency contract.
Much of the drama in agency changes has to do with a producer’s previous book of business. Often, an agent will see changing agencies as an opportunity to review client coverage. But this can be a sticky wicket—is a producer helping a client upgrade their coverage and contract, or are they churning contracts for the sake of getting a first-year commission and adding the client to the new agency’s book of business?
We’re not here to impugn anyone’s honor; the reality is this situation presents a strong potential for conflict of interest. So, some carriers require producers to get signoff from a previous agency for any contracts they move over to the new agency. Frequently, that includes a form or other verification the agent has to fill out testifying that they explained the contract differences to the client.
Carriers often require a release from the previous agency, as well, verifying the status of the agent. This may be:
The agent is in an open relationship with both agencies—still able to sell through and earn trailing commissions from their old agency book of business while taking advantage of new opportunities with a new agency.
The agent may be terminating their relationship with the old agency and leaving that book of business in favor of an exclusive contract with the new agency.
The agent may be in what we’re going to call a “bad breakup,” where there are some disputes and the carrier will ultimately put them on a sort of probation, decline to allow them to write products through the new agency, or otherwise find a different path for this particular producer partnership.
Since a carrier provides products and is also cutting the check for commissions, being accountable for where the money goes is paramount.
Agency contract—new and old
If a producer doesn’t know what their current agency contract is, they’re gonna have a bad time. Some agency relationships are open—they’ll take what they can get, and if a producer has other lucrative options, they’re free to pursue them. Other agencies are pretty territorial and demand exclusivity for certain products or lines of authority.
Even within these requirements, agency relationships are not binary. Some agencies provide a tier of benefits based on a quota or have a contract with producers that mandates a producer write a certain amount of business to “buy out” the contract.
This means a producer might change to a new agency that has a contract with the same carrier as the old agency, but, if the producer owes the old agency a certain amount of submitted business, the carrier has to be in-the-know. To further complicate things, if the producer is writing through a downstream firm, the agency and carrier may have multiple levels of contracts to consider when cutting up the commissions check.
For agencies, while quotas and contracts are traditional methods for keeping a producer and their business locked in, another option is to keep the producer separate from the book of business from the get-go. So, agencies may employ producers as licensed-only agents or through other contractual relationships that mean the person making the sale isn’t necessarily servicing the consumer’s business.
Carriers and producers moving agencies
To bring the discussion back around to the role of carriers in this system, the issue of a producer changing agencies is tiresome. If the producer is an independent agent, they may want to be affiliated with multiple agencies. Or they may be exclusive to an agency but want to switch for reasons that could make a very real difference in their business and personal life.
Yet, for carriers trying to do their diligence in tracking producers for compliance’s sake, and tracking agency affiliations to effectively pay commissions to the right parties, this shifting structure can be a paperwork nightmare.
To complicate matters, only a single state (*cough cough,* Washington, *cough cough*) maintains affiliations lists at the state level, and states have completely different processes to approach affiliations, when they require agencies to record or report them at all!
The difficulty of tracking and accurately reflecting agency hierarchies to pay out commissions or ensure you’re providing the right person with notices for contract changes isn’t just for carriers. Agencies that work with other firms and business entities up and down the compliance channel have the same needs to understand their complex distribution relationships.
How AgentSync helps when producers change agencies but not carriers: Hierarchy Management
When a producer changes agencies, every other agency or carrier that includes that producer in their hierarchies has a fire drill. From adding them to contracts to adjusting commission payouts to simply reflecting who’s responsible for whom in terms of DRLPs and direct reports, this data management work gets repeated over other systems and software.
AgentSync’s Hierarchy Management eliminates the drama by allowing your operations team to change the producer’s record to reflect their new status. With an API-driven modern solution, once that change is made, every instance of that producer’s data automatically realigns to reflect the new structure. No mistaken commissions payments, no repetitive data entry, no friction with old and new agencies.
Consider: You partner with a series of branch agencies under various doing-business-as relationships in one state while their parent agency is licensed as a resident business entity in a different state, all with downstream independent agent distributors. Mapping those relationships on paper begins to look like the mythical hydra. But with AgentSync Hierarchy Management, you can see who reports to whom and where, so you always know which producers and agencies are connected and in what way.
To learn more about how you can end paperwork whack-a-mole when your downstream producers change agencies, watch a demo or schedule a personalized consultation.
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