April 20

How Do Insurance FMOs Get Paid? (What You Don’t Know)

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Are you an independent insurance agent? If so, the advantages of working through an insurance Field Marketing Organization (FMO) are plentiful.

In addition to insurance products and services, an FMO can also offer agents extra perks they can't get anywhere else. This includes training, support, help with difficult cases, and more. 

This kind of assistance is critical to getting your business off the ground and growing it into the future. Yet, it's no secret that the insurance industry is filled with complicated concepts, including different pricing models. 

If you're just starting out, you might wonder "How do insurance FMOs get paid?" Where does the money come from and who pays who? What about chargebacks?

While these kinds of structures and setups aren't frequently talked about, it's important to understand how they work, so read on. Today, we're exploring the answer to these questions and more!


What is an Insurance FMO?

First, let's further explore what an FMO does and what it can offer.

You might have also heard of FMOs called Independent Marketing Organizations, or IMOs. If the organization has a national footprint, it's often called a National Marketing Organization, or NMO.

In short, an FMO is a marketing organization dedicated to the insurance industry.

Leaders in these companies offer insurance products and services to both independent insurance agents and the agencies themselves.

A typical FMO will represent many different carriers across varying product categories. Independent agents can get contracted through the FMO to sell those products. 

In many cases, an FMO will specialize in a particular market. At TR King, we specialize in various kinds of products. That means we offer insurance products centered at the senior population as well as others, with products that include:

  • Medicare
  • Annuities
  • Final Expense Insurance
  • Life Insurance
  • Supplementals
  • Long-Term Care

In addition, FMOs will represent many different kinds of insurance carriers, giving agents plenty of possibilities to choose from.

The Shift From Captive Agents to FMOs

Years ago, captive insurance agents comprised the majority of the industry workforce. These agents are contracted to one particular insurance company or agency and can only sell their policies.

While many still employ captive agents today, the benefits associated with these positions can be cost-prohibitive. Regardless of industry, most full-time, dedicated staff members require a plethora of perks, including:

  • Salaries
  • 401(k)
  • Health Insurance
  • Travel expenses

While they paid these expenses, insurance companies were still looking for a way to increase their outreach and exposure. Today, most insurance companies are managed by either lawyers or actuaries, both of which have limited knowledge of the sales field.

Both of these factors resulted in an eventual decline in insurance marketing, along with tanking sales numbers. To get back on track, they eventually shifted away from the captive agent model.

Instead, they started to look to independent agents and FMOs to help them increase distribution while decreasing expenditures.

Ultimately, FMOs exist to support and assist insurance agents as much as possible and make sure that his or her selling strategies are fruitful.

A few of the services FMOs provide to ensure this profitability may include:

  • Agent training
  • Lead Programs or Lead Resources
  • Top-tier products
  • Product and marketplace certification
  • Marketing guidance
  • Contracting assistance and software
  • Accounting assistance or guidance
  • Quoting and enrollment tools
  • Dedicated support
  • CRM Tools and guidance
  • Business guidance, client assistance, and mentoring
  • Incentives, contest, and promotions

This support is invaluable, but it costs the FMOs money to produce. That brings us to our next question:

How do they earn the money they spend out?

How Do Insurance FMOs Get Paid?

In short, the payment structure for an FMO centers on volume. 

An insurance company will go to an FMO and ask them to market their products. The FMO will examine the case and define how much business they can guarantee that the insurance company will generate with their help.

In return, the insurance company will establish a contract with the FMO that's high enough to earn an override. While there isn't always a specific dollar amount that the FMO has to hit, it's common for them to set production expectations in this way.

Using the Override Responsibly

Why does an FMO need an override in the first place?

Put simply, it costs money to make money. Any well-respected FMO will operate as a full-service marketing company. That means there is a myriad of team members on board tasked with providing guidance on digital marketing, accounting, lead generation, start-up cost, marketing plans, business best practices and guidance, and contracting endeavors.

Moreover, if you rely on one to handle your online marketing needs (e.g. website, quote engine), then the costs are higher, as the FMO has to build and maintain those tools.

In addition, FMOs may also generate lead costs, out-of-state license fees, and agent rewards, including:

  1. Cash Bonuses
  2. Vacations
  3. Advanced Training

All of these perks don't come free. An override can help offset those costs and ensure that the FMO is able to continue to provide those services into the future.

Does the Override Amount Differ?


The override received by the FMO will differ depending on the specific kind of insurance product sold. For instance, a Medicare Supplement will have a much lower override than a life product or ancillary product.

Does the Agent's Commission Pay the Override?


The FMO's override and the agent's commission are entirely separate entities. The insurance company is responsible for paying both the agent and the FMO, on separate terms.

This is where the value of teaming with an FMO becomes so apparent.

Most of the time, independent agents don't contract directly with an insurance company. Usually, there is some kind of intermediary involved. That means in most cases, you will need to partner with an FMO to sell a carrier's products on your own.

In addition to giving you that direct access, an FMO will also provide extra support and services as described above. Still, when you contract through an FMO, you will not take a commission hit.

Think of it this way: A policyholder doesn't pay more when he or she buys through an agent versus buying from the carrier directly, right?

As an agent, this step just makes sense. Why not take this step and reap the benefits for the same commission? You don't become a captive agent when you do so. You remain independent but with a greater arsenal of resources, tools and trusted guidance at your disposal.

Can FMOs Experience Chargebacks?

Yes, just as an insurance agent can.

For example, say you receive a commission for selling a life insurance policy to someone and you received a 9-month advance. Four months later, that policyholder decides to cancel. In effect, you might then see a chargeback for five months of commission taken out of your next commission check, all because the policyholder didn't pay off the coverage.

You're not the only one hurt by this move, as FMOs are equally affected.

Moreover, an FMO is also responsible if you perform any kind of illegal activity. For instance, if you accept an advance but run off and fail to place the policies, the FMO is left with that liability. 

That's why most FMOs only provide advances to reputable, trusted producers.

FMOs and Top Contracts

Yes, a great personal producer can earn some impressive numbers. However, it's easy for new agents to get stars in their eyes. 

Especially if you're just starting out, you might expect the top contract from an insurance company by claiming or speculating that you're going to make $40,000 in production. 

While those numbers are high, they're nowhere near as high as an FMO can claim. Top contracts are often multi-million dollar deals and require the bandwidth that only an FMO can provide. 


Pro Tip: For the most part, personal producers tend to produce less than $50,000, while a select few can do $200,000 or more individually.

As such, reaching the astronomical height of $5 million or more is out of reach. When you team with an FMO, that coveted top contract becomes much more attainable.

Executives within an FMO work tirelessly with the best and most relevant carriers to get the highest contracts around. On your own, partnering with those kinds of powerhouses and hitting those kinds of numbers is next to impossible.

Learn More About Teaming With an FMO

Now, we've shared a little more about what an FMO does and how it benefits you as an independent agent. We also answered the question, "How do insurance FMOs get paid?"

With these answers in mind, are you ready to take the next step and learn more about how our particular FMO operates?

If so, we'd love to connect. Get in touch with us today to learn more. You can book an appointment online, start a chat or call our office. We're here and ready to help.

Key Takeaways In This Article

  • FMOs are dedicated to the insurance industry they provide products and services to independent insurance agents and agencies.
  • FMOs are paid an override by the insurance carrier to help provide agents and agencies services.
  • The override and commission an agent/agency makes are separate entities.
  • FMOs experience chargebacks just like you.
  • Team up with a partner FMO to get all the benefits!

Over to You

We'd love to hear your thoughts in the comments below on:

  1. What made you team up with an FMO?
  2. Did you know FMOs experience chargebacks before?
  3. Do overrides make sense now?

If you have any questions, please leave a comment below. We will carefully read each one of them. Happy Selling!

About the author 

Matthew King

Matthew King is a co-owner of TR King Insurance Marketing. When he's not creating processes, content, developing training, and implementing digital marketing strategies, he likes to immerse in gaming with his wife and friends.

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