Insurance Agent Forum

[MedSuppPro]

Does your FMO agent release agreement include a stipulation “subject to Debit Balance” or does it state “subject to Charge Backs”? There is a difference…

I’m not a lawyer, so seek competent advise. Here are a few thoughts…

IMHO – It is fair to have an FMO agent immediate release agreement with a Charge Back Clause. Not a Debit Clause. The thing that I keep seeing posted is the Debit Balance Clause. Here is my attempt to shed some light on the difference.

Charge Back’s occur when people die or they switch to a different plan or CMS rapid disenrolls a member back to a certain date.

Debit Balance could include a charge back and could include advancements. This type of agreement could affectively block an agent FMO transfer for up to 12 months. Longer then most carriers require. For example, Debit Balance is listed on my UHC statement because they have advanced the annualized commission and each month they debit as earned my account.
If it were a Charge Back then I would need to make a payment to UHC and we would then be whole and I could move my contract to another FMO. I agree with a Charge Back clause – not a Debit Balance clause. There is a difference…

[patch36]

So, how is the FMO to collect the Debit Balance if they release you? Should an FMO be able to protect themself from a Chargeback or Debit balance. Shouldn't a Debit Balance follow you from FMO to FMO when associated with an insurance company you are appointed with and paid directly from? Wouldn't that alone settle the issue with an FMO if the insurance company that is paying you assume reponsibility for the accounting. The FMO should also be responsible for paying back anything they were advanced as there share of the commissions.

Isn't the fix for this problem really in the hands of the insurance company and not the FMO? The FMO should not get stuck with a Chargeback or Debit Balance other than the portion that they kept. In most cases it is far less than the agent was paid.

I'm not debating your premise, merely asking questions for the sake of discussion

[jdeasy]

Originally Posted by patch36

So, how is the FMO to collect the Debit Balance if they release you? Should an FMO be able to protect themself from a Chargeback or Debit balance. Shouldn't a Debit Balance follow you from FMO to FMO when associated with an insurance company you are appointed with and paid directly from? Wouldn't that alone settle the issue with an FMO if the insurance company that is paying you assume reponsibility for the accounting. The FMO should also be responsible for paying back anything they were advanced as there share of the commissions.

Isn't the fix for this problem really in the hands of the insurance company and not the FMO? The FMO should not get stuck with a Chargeback or Debit Balance other than the portion that they kept. In most cases it is far less than the agent was paid.

I'm not debating your premise, merely asking questions for the sake of discussion

Not him, but, yes, the debit balance is with the carrier and should follow you to any other MO. A debit balance is usually just unearned advances. Some of these companies want that money when they terminate the contract.

For example, I was heavily involved with NAA. About 3 years ago, Life Investors became part of the NAA portfolio. I wrote quite a bit of LI term during the first 6 months of 2006. I was advanced on what I wrote. It showed as a debit balance. For reasons unknown to me, NAA and LI parted ways on July 1, 2006. They sent out letters to all contracted NAA agents that they would be terminated as of that date, or one month later, I don't remember for sure. I had about a $4000 debit balance at that time. All the policies I had written were active and LI was receiving premiums. They wanted me to re-imburse them for those advances and gave me 10 days to do so. They would then pay it back to me as earned. I was able to negotiate with them since all my policies were active and they allowed me leave it alone with the agreement that, if my policies did fall off the books, I would have to re-imburse immedicately for that policy. Other agents were not so lucky. LI made them pay up. I don't know if that's SOP or not. That's the only time I've been involved a contract being termed in that manner. I don't believe that Shenandoah did that when they parted company with NAA on Jan. 1 of this year. I had already moved my Shenadoah a year ago and wasn't involved in that deal.

Chargebacks are a different story. If the MO has a responsibility for an agents chargebacks, then, of course, those should be a condition of a realese.