An entrance to exit planning: 12 FAQs about leaving the health insurance business

In the past few years, we’ve helped more than 20 health insurance agents retire. How? We purchase their book of business and then provide those customers with the same top-tier service we provide to their agents.

But, there are a lot of questions that come up during the purchase process. We’ve put together some of the most common below.

When should I start exit planning?

1. How do I know it’s time to consider retiring from this business?

You and you alone have the best answer to that question, but here are the most common scenarios we see:

You’re eyeballing a retirement date

A book sale doesn’t just happen when you’re in dire straits – it can be your gateway to sipping mojitos on the beach, too. If you’re ready to put your sales career behind you, selling your book can provide the income you need to fund your retirement.

You’re losing income

It can happen to anyone. Sometimes, despite your best efforts, all or a portion of your business just isn’t profitable anymore. Maybe it costs too much to service. Maybe a carrier’s commission cuts mean the margins just aren’t there anymore. Or maybe, you’ve lost your mojo. Whatever the reason, selling some or all of your book can get you back in the black in fairly short order.

Life happens

Sometimes, a life event triggers serious questions about your future. Maybe it’s an illness, that of a loved one, or someone else passing away. That switch flips, and now you don’t have the time or energy to invest in the business. You’d rather be focused on taking care of yourself, or those that are most important to you.

Technology and compliance become too much

Our industry demands flexibility. In the past few years alone, you’ve deftly handled call recording requirements, Medicare disclaimers, consent documentation, and a slew of other mandates. These, coupled with carriers’ ever-increasing reliance on self-service tools might have you saying “Enough is enough.”

2. What happens if I don’t have a succession plan?

Without a plan in place, a sudden illness or death could leave your family high and dry. Should you choose not to plan, your income will simply evaporate as other agents swoop in, or as your license expires. And so, just like you have a will in place for your personal possessions, a succession plan can give you a way to pass the value of your agency to your loved ones, too.

How much can I earn from selling my book?

3. How can I prepare for the valuation conversation?

Anyone who might buy your book has their own due diligence criteria to complete. Some will want to explore every aspect of your agency, from leadership interviews to compliance audits, and of course, a review of recent commission statements. Others will only look at recent income. While the situation will vary here, you should at a minimum be prepared to share at least your most recent six months of commission statements for each block of business you’re interested in selling.

4. What’s my book of business worth?

In short, it’s worth whatever someone will pay for it. But, on the whole, a prospective purchaser will examine your monthly renewals by product type and ballpark an estimate of what they’d pay for your book of business.

Most prospective purchases will offer somewhere between 1x to 3x your annualized gross commissions. There are a ton of variables impacting that multiple, but the overall size, product mix, and projected persistency of your clients largely drive the estimate. A large, diverse book with policies in their early stages will generally get closer to that 3x multiplier. An offer closer to 1x might arise for smaller, uniform books whose policies have been long-established. In short, books with more earning potential yield better offers. Your timeline for exit can also influence value, as some partners may want to retain you for some time to transition clients, develop new business, or consult. Others may be more interested in helping you depart quickly.

What are my options for exiting the business?

5. What are other agents doing?

Sadly, many agents don’t have a plan in place. Or rather, they plan to let the business fizzle out. They’ll stop pursuing new business, stop servicing customers, and collect whatever money happens to come in before it all just disappears.

6. What’s so bad about letting my business fizzle? I’m still drawing a paycheck.

Even if you remain available to your clients, they’ll quickly know whether you’ve still got their best interests in mind. If you’re not keeping up with product offerings, market trends, regulations, and technology, your service – and retention rates – will slip. Apathy and inactivity can put your income in jeopardy.

Plus, you probably know agents who make their entire living on poaching the books of agents who are done trying. There’s no rule saying you’d be exempt from their target list. And if they do start swiping, your income will dry up faster than you think. Selling your book guarantees you get paid for your business.

7. Who buys books, anyway?

While there’s a variety of partners out there, they’ll generally fall into four camps:

Companies who want a quick dollar:

We won’t name names, but there are plenty of companies buying books to just to let them run out. Targeting agents desperate to leave for whatever reason, they offer a very low valuation and roll the dice. They won’t service or grow the book, – they just want to stay on the right side of their investment.

Conglomerates who offer merge-to-exit agreements

Other firms offer merge-to-exit arrangements, where they’ll acquire your business and pay out over months or years. However, you’re expected to work during that period – and you’re expected to work for them. You’ll report to their area manager and be expected to take on their processes, procedures, and technology. Generally, you’ll also be expected to reach new business targets. Such targets may help increase your payout, but you may not have the appetite for meeting them if you’re on your way out of the business. In many ways, these agreements can feel a lot like starting over, which may be a challenge if you can see retirement on the horizon.

Up and coming agents:

One way younger agents can quickly find their footing in this industry is to buy someone else’s book. And, they often don’t buy the entire book – just the portions they’re interested in maintaining and growing. If you’re looking at your career’s sunset, you may find one or more willing agents who will invest in your retirement in return for a head start on their customer base. These agents may also invest in physical assets and infrastructure if they can afford it.

Field Marketing Organizations:

Your FMO can be a great fit. They know you, they know your business, and you know the great service they provide. We’ll explore this option below.

Why should I consider selling to my FMO?

8. Why would any FMO want to buy my business?

Let’s talk money again. Buying agent’s books is in your FMO’s best interest. They’re already making a small override on your business, and they don’t want to lose that. If someone else poaches your customers as you’re letting business fizzle out, their bottom line takes a hit, too.

9. What makes an FMO a better purchase partner?

Money matters here, too. Generally speaking, FMOs will have more resources on hand than other organizations. That means you’ll get better valuations for your book. They’ve already got great relationships with your carriers, meaning that they’ll be able to solve any customer service issues in a snap. And, they have the resources and staffing in place to take care of your clients as well as you would.

What role can Action Benefits play?

10. Why is Action Benefits interested in buying my book?

We have a decades-long history of partnering with agents throughout their careers – and that includes helping them think about what comes after they decide to hang it up. We want to help you retire with the peace of mind that your clients are well-cared for, while also providing avenues for us to continue to grow our own.

11. How long does the process take?

If the timer starts on the first discovery call, better than 50% of our deals have closed within a month. Much of the process depends on whether you or an upline claims ownership of your book, the time it takes legal teams to review the purchase agreement, and the speed at which carriers can process the transaction. After completing over 20 of these deals, we have a good idea of what it takes and can help you navigate each step at a comfortable pace.

12. Who will take care of my clients?

We’ve built a retail team that’s licensed in 25 states and counting, and they support over 30 carriers across a broad variety of lines. On this team, you’ll find long-time Action experts like Wendy Cova, Fay Remijan, and Troy Albrecht. The team has full access to every industry expert, communications tool, and technology resource Action has on hand – and they bring it all to bear in service of your clients.

A partner you can count on – now, and in the future

Whether you’ve worked with us as your general agent in the group market, or as your FMO in the individual & family space, or in the Medicare markets, you know the level of service and support we offer our agent partners. If you’re considering leaving the business, we’d love the opportunity to talk with you about your next steps. Schedule your no-cost, no-obligation consultation with our Broker Sales Team.