Back in December of 06, I left an insurance company that I worked for as a licensed insurance agent. In January of 07, I received a letter from the company stating that I owed $25,000 in cancellations. I didn't respond to the letter and still haven't received any correspondence since then.

Here is my question... A lady who used to work for the same company but left 6 months earlier, just received a judgment in the amount of 5,000 for same reasons (commission chargeback’s). I am pretty confident that mine will be coming soon. Will this be considered a criminal matter? Will I have to go to jail? Can they garnish my wages? What should I do once I receive my judgment? The judgment that my friend received stated that the insurance company had hired a collection attorney.

I am really concerned regarding the amount I owe. When I was working for them, I had a lady who was providing referrals for me. After I paid her the referral fee, the accounts started to cancel.

What should I do first... Once I receive the judgment, is there anything I can do to "buy some time"?

I may ba nieve regarding the finality of your accounts closings, but it seems simple enough: you close the initial sale but the company couldn't retain the account... and they want you to pay them back??
Is the company accusing you of negligence or complacency?
I don't understand?

An average commission(take home for me) was $600.00 per sale. The company paid me up front for the total commission earned. The company then expects to be reimbursed once the client continues to make the monthly payments. Once the client cancelled the policy, the company not only is out the $600.00 they paid me, but doesn't have the account. Make sense?

Not a terribly unusual situation - I've heard of real estate companies working the same way, paying the commission up front, deal falls through, they backcharge the agent.

Would appear your mistake was ignoring the first letter - did you think they were going to walk away and write this amount off?

Have you been served with papers? The company can't simply get a Judgment without a hearing and you have a right to a breakdown of the amount.

And, yes, they can garnishee your wages. It doesn't appear to be a criminal matter unless you were somehow falsifying information and you don't go to jail for debt.

This is a sticky situation. I'm sure that some kind of time frame applies as to how long after a policy sold by you is cancelled you are responsible for paying back all or a portion of the commission you earned from the sale. And $25,000 sounds like an inordinate amount ; just how many policies were cancelled? Also keep in mind that, regardless of how many policies may have been cancelled, you have to earn at least minimum wage for however many hours you worked, including time-and-a-half for hours over 40 in any week. I know that a lot of insurance agents work more than the standard 40-hour work week so that's a factor to take into consideration as well. I'd consult with an experienced labor law attorney. Meanwhile, respond to any correspondence you receive by stating that you intend to defend against any action they may take against you.

This is very common in the insurance industry, but I would have to say it is not usual to have over 25,000 in cancelled pollicies.

What happens for those that don't know. If you sell a life insurance policy for example, and the premimum is 100 dollars a month, the agent who writes this policy will get lets say a 25 percent commission on the sale.

So what would happen instead of just getting 25 dollars each month the person pays there policy, the companay pays them a full year worth of commssion up front. So that first month instead of just getting 25 dollars they at 300 dollars for that sale.

But if the person drops the policy after 3 months, the agent has to pay back any unearned commssion, or basically have to pay back that 225 in advanced commission. The advanced commission is basically a loan.

There are some companies that are a lot worst than others, Iwon't name any one directly but some may have as much as 20 to 40 percent of their policies droped over the first year. Others have as few as 5 or 10 percent.

Now as long as you are selling, the charge backs merely come out of current commissions and there is no problem, The problem is when you quit or get fired, then what happens is you will have to pay them back each time a policy is cancelled.

So it is like a loan for commssions not earned. For example the company I sell for pays you 6 month advanced commission and puts the other 6 moths advance commission into a fund. If you get any change backs it comes out of that fund not your paycheck, unless you have too many charge backs.

Also no, in insurance sales there is no min wage, you are not normally considered an employee but a independent contractor, and paid strictly commission, so these funds are considered a loan, on future commissions and have to be repaid if there is that many policies that laspe.

They do have to provide you with a listing of those policies and it would be intersting to find out ( contact them) to see if they really did cancell or if they were switched to another policy by some other agent.

But as for as the having to be paid min wage, I will disagree greatly, since for example, the agents I hire often make no money at all, if they don't sell they don't make a penny. And will lose money often since they provide all of their own expenses.

What she needs to do is find out if these figurews are real and to work out a payment plan with them before they get a judgement on her.

Thanks for the explanation. But I would think that if insurance agents are independent contractors then they could dictate the terms of their own compensation. For example, they could charge a set non-refundable service fee for each policy sold followed by a monthly commission on the premiums paid, thereby avoiding a situation where they'd have to pay back a commission on a cancelled policy. It seems that it'd be more in their interests to take that type of approach. On the other hand, if the insurance companies are the ones dictating their sales agents' compensation plans then they're really not independent contractors. In name perhaps but not in actuality.

Yes, they can take merely the monthly commission as paid but I don't know any that do, well I do on two companies I write for. But for first and second year agents ( until they get renewals coming in, there is just no way to make a living without advanced commission.

If you write 4 policies a week, with advanced commssions I may make 1000 a week, but if I got only as paid, I make about 100 bucks.

Now the company I work for, does a 6 month advance, and put the other 6 months advance into a savings type account. So if you do get a charge back, the charge back is taken out of that, you can draw money out of it, after it gets to 20 thousand or so ( I think, I just let mine sit in there)

But the thing is, if you are honest with the client, nomrally you don't have that many charge backs, There is one company I know of, that is really bad, but that is because they do somewhat deceptive selling, so when people try and use the product they are shocked.

But in the end, many of the charge backs are not that bad, I think last year I had about 2000 in charge backs for the entire year, ( now I am only part time) So it amounts to about 5 percent of my sells.

To me, it sounds like perhaps this company sent new agents out to switch them to new companies.

When I moved to GA a few months ago, I got real mad, my wife moved first, and "transfered" all of our car insurance, the agent rewrote the policies, not transferred them, so they got underwrote again,

I know he cheated us, on this and I have spent a lot of my spare time, making sure his company knows about it, Plus I am changing agents very shortly.

I would like her to let me know what company this is ( even private PM) I try and keep track of things like this.

A lot is the company, the one I sell for has a staff that does nothing but try and stop people from cancelling.

But it is all part of the sell for new agents, showing them they can make 2000 a week if they work hard. Often they forget the other parts of the contracts. It is basically a no interest loan ( actually in some companies they even do pay interst on these advances.

But yes, many companies offer agent, general manager, agency manager and other type contracts, a lot will depend on a persons situation.

Now some of thse companies actually break the rules, if they do then your idea of hourly pay comes in. they set office hours for the agent, now this helps the agent in getting leads from the phones, and using company phones to make their calls.

But then if this person has charge backs of 25000, they had to most likely have made in payments way over 100,000 and most likely closer to 200,000. So not knowing all of the figures not going to feel real sorry for them too fast.

Well, the employee or independent contractor language and method of payment have to pass the IRS test and probably comply with State Tax Laws, also. I know there's often a thin line.

I would think when you are selling a product or service for someone else, on commission, you probably cannot dictate the terms and arrangements of your own compensation.

Sounds like the same type of arrangement certain real estate companies have - you start taking draws on your commissions, sales fall through, they pretty much own your soul.

I am aware that some banks are offering this type of commission to salespeople on home equity loans - wonder how many of those fall on their faces?

Hello Staci:

The discussion regarding whether you owe the commissions back, and how the overpayments occurred, has been fully vetted by my fine colleagues. No matter how it turns out though, it's a civil case.

I, on the other hand, am concerned about the criminal case. As noted, even by your own accounts, $25,000 in overpaid commission is, let's say, an UNUSUALLY large amount.

In addition, you apparently paid a referral fee to ONE lady for the bulk of this business. Then after SHE got her money, the accounts started cancelling...

If I were your employer, I would refer your case to the cops. If I were the cops, I'd be looking VERY closely at these transactions, and I'd want to be charging somebody with a felony. Course, I have a suspicious mind... But, so do the cops.

I think the cops will be knocking on your door in short order. DON'T talk to them. Hire a good criminal attorney.

Now, if I'm wrong (and I was back in '02), you're going to need an attorney anyway, because they're not going to sue you in small claims court for $25K. It ain't going to happen.

excon