After recruiting insurance agents for several years to residual-based products like Medicare and ACA, I’ve come to the conclusion that the vast majority of agents new to insurance should steer clear of products that do not pay a high first year commission, even if the product offers a great long-term passive income opportunity.
Here’s why I do not recommend new agents start in the insurance business with products like Medicare and ACA:
1. Lack of cash-flow.
As the saying goes, “cash is king.” And without a steady and significant flow of cash to fund your business, you’re toast.
Case in point: in my Father’s early days in business, his chemical business secured several large corporate accounts. Pay on product occurred on a net 90 basis, meaning DuChem (his company) was paid 90 days after delivery of his chemical sanitizing products.
The good news: product sales were great! The bad news: cash flow sucked!
It got so bad for Dad that he had to sell most of his furniture to come up with the money to keep payroll going until the corporate accounts paid out. Thankfully, he made it and sold out to Ecolab in 2006 at age 49. Pretty good for a poor kid from Detroit =).
Likewise, selling residual-based products like ACA and Medicare pay great long-term, but cash flow poorly short-term. Medicare Advantage pays a pro-rated advance on replacements that diminish with each passing month, and ACA only pays as-earned.
And, when adding in costs of doing business – chiefly, your lead expenses – the vast majority of agents will not last very long, as personal bills must also be paid out of what’s remaining.
The solution to low-cash flow? Sell life insurance!
Selling mass market life insurance products like term, mortgage protection, and final expense (this is what my company coaches agents to sell) offer a way to make money quickly at a decent level of profit.
If you’re like me when I started, I needed money *yesterday*. And selling life insurance allows you to get into business quickly and start cash-flowing immediately, unlike residual based products.
2. Fast Start-Up Time.
Another downside to starting your career selling Medicare or ACA is the time it takes to become ready to sell. In addition to getting your health license, you must acquire your AHIP and carrier credentialing to sell Medicare Advantage, and your FFM credentialing to sell ACA. Additionally, health products are generally more complex in design with many more moving parts to understand as compared to life insurance products like final expense.
Typically, the more time it takes to be prepared to sell, the more likely your momentum and enthusiasm to start will diminish, meaning less new agents will actually end up selling.
Compare that with life insurance products; if you’re in a well-structured program, after you get your license, you should be both confident AND competent in 10 days or less, and ready to prospect for sales.