Many people are fully aware of insurance agents and brokers and what they do. They meet with clients and explain potential coverage and service existing business. People also know who and what insurance companies are. When you sign the dotted line, you are purchasing coverage from an agent who represents that company. However, there is a 3rd rail to the insurance system and they are called National Marketing Organizations or NMO’s.
National Marketing Organizations (NMO) are known by a few other names.
Field Marketing Organization (FMO)
Internal Marketing Organization (IMO)
National Marketing Organizations are “middle men” who promote and train agents and brokers on insurance products. They constantly recruit independent insurance and promote insurance products to them. When an agent writes business, the NMO receives an over-ride on commissions. The more agents they recruit, the more money they make.
NMO’s recruit independent agents who are not contracted or captive agents with one insurance carrier. Think Allstate, Farmers, American National, North Western Mutual and MetLife agents. Independent insurance agents are often times referred to as insurance brokers. They are able to place business with any company they choose that fits their client’s needs and are not required to sell only one insurance company’s products.
Over-rides are Less Expensive
All but a hand full of insurance companies require agents to contract with a NMO instead of contracting directly with the insurance carrier. The Insurance Company wants agents to be trained and serviced through a 3rd party which creates competition among NMO’s for agent’s business. It is less expensive for the insurance industry to pay over-rides to marketing companies for training and servicing agents than it is to hire a few thousand home office people who have to train, service, and market these very same products. When business is down, the insurance company does not have to constantly hire and fire people according to fluctuations in business.
Time to Sell
National Marketing Organizations get contracted with multiple insurance carriers for annuities, life, disability, and long term care insurance. Some NMO’s like the one I used to work for started out just wholesaling annuities and eventually added life insurance to the mix. In order to keep contracts with insurance companies, the NMO has to submit a minimum amount of business or production to have that insurance company available to sell to their contracted agents.
Insurance Company (s)
NMO, FMO, or IMO
Insurance Company (s)
NMO, FMO, or IMO
Broker Dealer/ Insurance Agency
Sometimes an insurance agency or a Broker Dealer is located in the commission hierarchy. Sometimes the agent will receive a cut in their street commissions or will be placed in a lower commission level. A street commission level is also referred to as the General Agent (GA) level and this means that they are receiving the highest level agent commission without taking a portion of the commission from their NMO.
Marketing companies receive an over-ride when an agent’s policies issue and pay out. The agent and the NMO are paid directly from the insurance carrier according to their respective levels. Agents and NMO’s can also be eligible for insurance company incentive trips, bonuses, and deferred compensation plans. Some NMO’s give their top performing agents additional compensation in the form of.25%-1% for their production. The reason why a NMO would do this is for a few reasons:
Something is better than nothing
It is better to have a big producer under your organizations instead of your competitors
A big producer can help a NMO achieve bonus levels with insurance carriers
Things to Look For when Choosing an NMO
· Training from sales people (Not Home Office People)
· Marketing and sales ideas
· Case follow up
· Good Contracts
· Lead Systems (Most leads are horrible)
If you are an independent agent and are looking for a new or additional NMO to work with you should make sure the NMO will give you a release of your contract at any time. Make sure to get this in writing before you contract with them.
I cannot tell you have many times over the years that an agent could not move over to my old company because their current NMO would not release them. A NMO will essentially hold that contract as long as they can. Meanwhile, you will have to sell a different company that may or may not exactly be best for your clients needs.
National Marketing Organizations are necessary for the fluid movement of day to day insurance transactions between clients, agents, and insurance companies. Without NMO’s, business would not be placed in a timely manner and agents would not get the correct training on products to show to their clients. NMO’s are truly and asset to the industry.