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 Channel Futures

Telephony/UC/Collaboration


Agent Poll Reveals Community Concerns

  • Written by Channel
  • May 31, 1999

Posted: 06/1999

Agent Poll Reveals Community Concerns
by Kathy Katcher

Most agents are concerned with similar issues. How-ever, due to the lack of
communication between one agent and the next, as well as the lack of communication between
carriers, each agent or carrier feels he or she is the first to have such concerns. As a
liaison between carriers and agents, the representatives of the Independent Agent Network
(IAN), Baltimore, see this firsthand. To get a more accurate assessment of what agents’
concerns really are, IAN polled its 4,500 members, of which 604 responded. Their answers,
which follow, range from predictable to surprising.

Would You Sign an Agent Contract Without Changing It?

No. More than 70 percent of agents responding to the survey say they are making changes
to the original contract before signing it. Since carriers often present agents with
contracts that are heavily weighted in their favor, IAN recommends to its members to find
out what all the clauses and terms mean before agreeing to sign a carrier’s contract.
Significantly, however, more than 80 percent of respondents said they did not have a
lawyer review the carrier contract before signing it.

Who’s Eating Bad Debt These Days?

Not Agents. More than three-fourths (77.6 percent) of respondents currently are not
shouldering the responsibility for bad debt. Of those that do accept bad debt
responsibility, 58.3 percent say they are only responsible for up to 10 percent of the bad
debt. Carrier contracts run the gamut on this issue. IAN has reviewed some contracts that
hold the agent responsible for 100 percent of the bad debt and others that hold the agent
responsible for bad debt only when the bad debt rises to a certain level.

Do You Know Different Ways of Getting Paid?

When asked whether they are receiving a residual commission check or getting upfront
cash for their book of business, nearly 90 percent of agents responding to the survey say
they are getting a residual check each month. However, the survey found that many agents
are not aware of agency programs that offer upfront commissions or combine upfront
payments with a discounted residual.

As a point of clarification, here’s how some upfront payments are paid: An account that
bills $500 per month, for example, typically would bring an upfront cash payment equal to
monthly revenue (e.g. $500).

Upfront cash per automatic number identification (ANI) plans also are very popular with
agents selling residential and small business accounts because those customers tend to
bill lower in volume and switch providers much more frequently. On average, carriers pay
between $6 and $15 per ANI. These types of payments usually are paid weekly and normally
are used by telemarketing rooms.

There are other agent programs through which an agent can sell its accounts to the
carrier after a period of time and forgo future residual payments. These programs usually
pay multiples of two to three times the monthly billing of the base, depending on the
average size of the account, bad debt and payment history.

Upfront cash programs may seem to defeat the purpose of creating a base of customers to
draw a long-term residual. However, such an option can be useful to an agent in certain
circumstances. For instance, new agents may consider an upfront cash payment in the
beginning to supplement their income or to finance new growth for their companies.

Agents should know it isn’t an either-or decision; there are programs that offer both a
residual commission and upfront payments. Additionally, agents can split their business
among various carriers, each offering a different way of getting paid.

What Does the Average Agent Think About Equity?

Most agents say they are confused by the equity proposition. They want equity but
question whether there will be payoff in the long run. More than half (54 percent) of
respondents felt that equity participation would not pay off. More than one-fourth (27.3
percent) weren’t sure, and only 22.3 percent felt certain that the payoff would be there.

Only 18 percent of respondents said they would be willing to accept a lower commission
to gain equity.

IAN recommends that its members carefully weigh possible future gains from equity
participation vs. a higher commission today. Many equity programs are relying on
yesterday’s and today’s margins and rates, which may never come to fruition.

My Carrier Was Just Purchased. Will I Keep Getting Paid?

Of the 73 percent of responding agents whose carriers were purchased, 42 percent said
that they have continued receiving a commission check.

IAN also asked if agents had ever moved their customers to a different carrier after
their current carrier stopped paying them (for reasons other than being purchased).
Astonishingly, 93 percent had. This response would indicate that carriers are far more
likely to find themselves in financial trouble than they are to be purchased. This should
remind agents to pay attention to long delays in provisioning accounts, lack of returned
phone calls and–the most obvious sign–a late or absent commission check.

Arbitration–Good or Bad for the Agent?

Interestingly, 77.8 percent of agents did not know what an arbitration clause was. Six
percent had no problem signing an agent contract with one in it–probably because they
don’t know what it is.

Essentially, an arbitration clause prohibits the agent from taking any legal action
against a carrier, unless by an arbitration board. Arbitration can be costly for the agent
(as it’s based on the amount of money in dispute, as well as certain minimum costs) and
basically makes it cost-prohibitive to go after smaller amounts.

Kathy Katcher is vice president for the Independent Agent Network, Baltimore, a
membership organization dedicated to providing agents with the latest information on
competitive agent programs. She can be reached at +1 888 TOP 25 LD (867 2553), ext. 168.

Tags: Agents Telephony/UC/Collaboration

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