Partnering with a non ins company how do I pay?


New Member
Question: How do I pay

I am partnering with a non insurance company who is looking to hand their clients off as part of a need that they have. The company basically has an independent team out looking for businesses to refer, to their sales guys, for the products they sell. However, often there is a need for insurance as part of their needs for the added services. My company would be partnering with them and running the insurance side of the calls. The business would be placed through my company. Big question, how do I pay the company? They want to take part in a percentage of new and renewals of their clients. It's a referral fee and its not as I am not being referred business, I am part of their pitches to their clients but, I am also not paying unless I write business. Also, I am not paying an individual, I would be paying a corp.

I cannot find any answers to this anywhere.
This is not legal or compliance advice. You will probably want an attorney to draft up a joint venture partnership agreement spelling out the rights and responsibilities for both parties.

You cannot split commissions with non-like-licensed individuals. For example: If I have a life license, but you have a P&C license, we cannot split my life business or your P&C business. We both have to have the same licenses and (ideally) both appointed with the same companies.

That being said, the legal "workaround" is to form an LLC and have commissions paid to the LLC by the companies you represent. (No, don't try transferring your individual commission to the LLC. That won't work. Make it direct by the insurance company.) Then the non-licensed party can be a member of the LLC and you can split the revenues that way. I'm not sure if a corporation can be a member of the LLC, but I don't see why not.

You need legal and compliance advice to do this right - or if you can even do it at all.
If they bought some of your stock, wouldn't they be ENTITLED to a portion of ALL your revenues, not just the commissions they generated?

That's why you'd want a separate LLC for this venture.

Google is not a substitute for legal advice or compliance requirements. You need an attorney.

Setting these things up can and will cost you thousands of dollars. Don't cheap out on this. You can and will get into serious administrative trouble with your state under the rebating laws, etc.

The fact that you've already made informal arrangements on something without looking them up on whether you could do them in the first place (and how often it is referenced that you cannot share commissions with anyone without a similar license)... really makes me question your competence as a licensed professional.
I have made no such arrangements. No agreements. This is the very beginning and I am trying to get this done right. Unfortunately there aren't many resources for this sort of thing when it comes to insurance (real estate has a legal advice line in CA). When I mentioned google, I was referencing the search for that type of attorney. What type of lawyer would be recommended, that's what I meant. There is really no need to be insulting is there?
You are also going to want to check with any wholesalers and carriers as far as what their contracts allow. For example, my cluster contract would not allow this. When you check with the carriers and clusters, they may also help guide you as to what is allowed in the state, but I expect calling the DOI would be a good next step on that end.

Furthermore, keep in mind a good attorney is very expensive, but a cheap one will cost you much more in the end. You may want to check with Brian McSweeney in San Mateo Ca. He helped me put together an insurance specific contact a few years ago. He was smart, and had a lot of good experience, and clearly knew the ins and outs of insurance from the agent end. He wasn't cheap, but I definitely got what I paid for.

Good luck.
I have made no such arrangements. No agreements. [...] They want to take part in a percentage of new and renewals of their clients.

I am partnering with a non insurance company who is looking to hand their clients off as part of a need that they have.

There is a difference between "I am partnering" versus "I am exploring the possibility of...". The fact that you said what they want out of the deal... tells me everything.

I only go with what is written, not trying to discern any other meaning.

It's a referral fee [...]I am also not paying unless I write business.

And no, it isn't. A referral fee is a flat amount and not based on a percentage of anything. Plus, referral compensation is not to be based on the result of any sales.

So yeah... I rightfully question your knowledge of the insurance code.
The easiest way would probably be for someone with the referring company to get licensed. Then just put them on the app for whatever percentage you agree upon. They may have to get a corporate icense. It is a little hassle, but if you are talking tens of thousands of commissions, it will be worth it. If you are talking about a very occassional case, the whole deal might not be worth the trouble.

Keep in mind it is hard to get insurance leads when trying for insurance leads. I would question how numerous and how good any leads will be that happen to fall through the cracks of marketing for something else.

As others have said, This is not legal advice. You should talk to your state DOI and/or an attorney. If you get in trouble, quoting advice from a group forum won't be much help.