However, you can also limit your potential transfer income by forging an exclusive relationship. You may be able to prevent yourself from contacting other insurance agents. This is a business decision that you must negotiate with the insurance broker. This article provides a general overview and general instructions on referral agreements, but note that each situation is unique. The key to a successful removal relationship is to ensure that the parties are compatible and that the agreement is developed to reduce risk while providing both parties with the opportunity to succeed. You should ask yourself whether your referral relationship with the insurance broker will be exclusive or whether you can establish similar relationships with other insurance brokers. You can accept an exclusive relationship because you can be sure that your clients are in good hands with the insurance broker with whom you have a relationship of trust. First, it is essential to include a provision requiring the source of reference to obtain and maintain all insurance licences, authorizations and authorizations necessary to allow it to collect commissions under existing national legislation. This obligation should be the source of the recommendation and the insurance agency should have the right to withhold payment of commissions until the source of the recommendation has obtained all the necessary authorizations. In most countries, the payment of a commission to a referral source who does not have the required manufacturer`s licence and other applicable authorizations could result in the loss of the Agency`s insurance licence, as well as heavy fines.
The laws on the payment of commissions for transfers differ from state to state and it is therefore essential to contact legal advisors before entering into a referral agreement or paying commissions on them. Another risk is that the source of the recommendation may guide clients who are not well suited to the insurance agency. The Agency should review the potential source of supply to ensure that the quantity and needs of potential customers are in line with the Agency`s expectations. Despite the best efforts of both parties, it is also possible that the removal agreement is simply not working as intended. Perhaps the source of the recommendation will not be ready or able to direct the volume of clients it thought it had, or, less likely, the insurance agency will not be able to adequately meet the insurance needs of customers. The main risk associated with the conclusion of a removal agreement is that it could have a negative effect on the relationship between the insurance agency and its other sources of referral. For example, when an agency enters into a formal transfer agreement with a bank, other banks may not be inclined to refer clients to the Agency, lest the Agency in turn pass its clients on to the bank with which it has a recommendation agreement. It is important that the agreement can directly prevent the Agency from cooperating with other companies in the same sector as the source of the recommendation. From the client`s point of view, a referral agreement may send the message that the recommendation is less concerned with which insurance agency is best, and even more about the insurance agency that will pay the highest commission at the source of the recommendation.