D&D Insurance LLC
                              The Medicare Masters         

  David E. Walls

THE TRUE COST OF BEING CAPTIVE

Deciding whether to go independent or captive can be daunting. When you understand what each offers, it makes the decision much simpler. Let’s look at an example of the return of investment (ROI) for each.

We’ll call the captive organization ABC. Let’s say you are with ABC and looking for 10 leads per week. They will charge you for the leads, but will also give you a great discount and make sure you get those 10 leads. These leads will, on average, earn you $20. This is a good price but your commission levels are low, so in reality the cost is higher. For example: you sell a policy at $50 per month (the industry average) and you are on an 80% contract (it could be lower, but this is a best case scenario). That is $50 X 12 = $600. $600 X 80% = $480 that you would make in commission for the first year.

If you were on the 105% contract with an independent company, which we will call XYZ, then you would have made $630 for the same policy. That’s a $150 difference!

With ABC you pay $200 to get your ten leads and by average you sell half. Each sale averages $50 per month. You have made $480 X 5 = $2400 minus the lead cost of $200, which is a net gain of $2200. Not bad, right?

If you were straight with Company XYZ and use your own lead program and it costs $335 per 1000 piece drop with an average return of somewhere around 1%. That's 10 leads, right? Well, let's make it less of a return. Let's say you have to drop 2000 leads to get the 10 leads back. That cost's you $670 to get 10 leads. You sell 5 of them at the $50 average, but you're making 105%. That's $630 X 5 = $3150. Minus your lead cost of $670 = $2480 net gain! You're $280 better off and you still own the business. But wait...there's more! With ABC, you will (probably) leave your clients when you leave them. With ABC, you will get maybe a 5% renewal (if you last that long). If you are contracted with XYZ at the 105% level, your renewals are 7% (or probably higher). That's 2% more in your renewal base.

You can see how being captive causes you to pay dearly.

But what about ABC offering “training?” It’s got to be worth something, right? Or, you could pay merely $79 to receive training through FinalExpense101.com and ILIAA.org and come out way ahead.

In the end it is up to you which is the best fit.