Insurance 101: FMOs vs. IMOs vs. NMOs

The insurance industry and its myriad abbreviation jumbles use field marketing organizations (FMOs), insurance marketing organizations (IMOs), and national marketing organizations (NMOs) somewhat erratically. Even organizations that self-identify under these labels are uncertain about some of the distinctions.

Today we’re diving in on these (insert adjective) marketing organizations with an eye on broad-stroke definitions.

What is the difference between an insurance FMO, IMO, and NMO?

There may be contextual differences depending on what area of the industry you work in, such as FMO being more common in use among health insurers, but the brass tacks of these three entities are that, practically speaking, there is no difference.

This may come as a surprise. Some FMOs, IMOs, or NMOs are quite particular about what they want to be called. And NMO seems to be organically evolving to provide a broad, generic label for any organization that identifies itself as an FMO only or IMO only. But, here at AgentSync, a lot of the distinctions we make have to do with how a business is regulated, and the compliance standards they’re required to follow. And, in the case of the three musketeers of marketing orgs, they’re the same.

There’s probably some wiggle room to talk about the distinctions that organizations make based on vernacular usage and perception – not unlike the difference between MGA and MGU. Briefly, MGA is more common to use for businesses operating in property and casualty arenas, while MGU is the preferred term in life and health insurance lines, but someone using them interchangeably wouldn’t be wrong: Whatever you want to call them, what matters is which laws they have to follow.

So, what is an FMO/IMO/NMO?

These terms are interchangeable (depending on one’s preference) for an organization that sits between an insurance carrier and an agent sales force in the insurance distribution channel. A few commonalities:

• These marketing organizations are most common to agents working in life and health lines of authority.
• Independent financial professionals – those who eschew binding “captive” agent agreements with an agency or carrier – are the most likely to use these organizations.
• Most marketing organizations boast a suite of wraparound services, from marketing to training, that they provide to agents.
• Carriers pay a percentage of an agent’s earned commissions to their associated marketing organization.

Where do FMOs/IMOs/NMOs sit in the insurance distribution channel?

They’re in the same position as what you might classically think of as an agency, sitting between insurance carriers and insurance agents or brokers. In fact, regulatorily speaking, a marketing organization is regulated the same way an agency is – in most states, this would be under “business entity” regulations.

Marketing organizations may have fairly exclusive relationships with a single carrier, but it’s more common for them to work with many carriers in the same niche space. And, when an organization is calling itself some variation of marketing organization – FMO, IMO, or NMO – you can bet they’re working with independent agents.

Typically these organizations contract directly with carriers – no MGAs or MGUs in between – specifically because that’s actually the main draw that they have for independent agents.

Why do independent agents work with FMOs, IMOs, or NMOs?

To sell for an insurance carrier, agents need a contract, specifications of their duties, the kinds of policies they can offer to clients, spelled out commissions, etc. While some carriers offer contracts to independent agents individually, it’s still seen as unusual. More typically, agents have two means of accessing a particular carrier’s products: join the carrier as a captive agent who can only sell that carrier’s policies, or join a third party that has one of these coveted contracts with the carrier.

Sitting down and sketching out a contract with each agent that comes their way is just frankly not a realistic use of time and energy for carriers’ legal teams. The appointing process in relevant states is already a bit of a nightmare, and that’s without negotiating terms, redlining, and all the other legal nonsense that goes into securing a contract. So marketing organizations and other agency structures provide an essential piece for insurers in rounding up large teams of independent agents who are interested in selling for multiple carriers without having to set terms for each person and each carrier.

FMO, IMO, NMO relationships with independent agents

Independent insurance agents who work with a marketing organization middle man have a contract with that organization. It may specify that they have to provide a certain minimum level of sales to earn a preferred commission split or certain services. 

Typically, these organizations are fairly fluid in terms of their contractual relationship: Changing FMOs, IMOs, or NMOs is often as easy as signing a contract one month and terminating it in writing the next. But this isn’t universal by any means – depending on how your book of business is earned and how many auxiliary services the organization provides, you may be stuck by what you’ve heard of as “golden handcuffs.” These are services to your business that are so instrumental that leaving the organization – and the affiliated services – could fundamentally change your business.

Additionally, if your agreement with the marketing organization gave you certain services or commissions in exchange for writing a level of premium and then you didn’t, you may be on the hook for buying out your agreement before you can leave.

This isn’t unlike the situation with most agencies – changing your agency can be easy… or not. It just depends. If you’re a producer, one #protip is to figure out how free – or not – the marketing organization’s contract is before you sign.

How does an FMO/IMO/NMO make money?

Marketing organizations make money based on the agents’ commissions. Captive agencies provide services like a preliminary book of business, office space, and national branding opportunities to their agents, and may keep a very sizeable percentage of an agent’s commissions. FMOs, IMOs, and NMOs provide far fewer services, and so have a smaller commission split.

Frequently, the commission for a sale represents about 10 percent of a contract’s first-year value. Depending on the contract, a carrier may split the commission payments between an agent and a marketing organization 7:3 or 8:2, with the agent keeping the larger share.

Marketing organization roles with independent agents

Captive insurance agents have a role with their agencies that are closer to that of a traditional employee agreement. Independent agents, however, are mavericks, building their insurance businesses from the ground up. Yet, while passing an insurance examination is the barrier of entry to start an insurance business, actually running a business – any business, really, – takes a whole set of skills that aren’t on the insurance test.

FMOs, IMOs, and NMOs sit between agents and carriers in the insurance pipeline because of the ease to agents of joining an existing contract umbrella, but the real differentiating factor is in what they offer these agents who otherwise are going it alone. Business coaching, marketing materials, technology, and other services can be true assets to attracting and maintaining an independent agent force. 

Whatever agencies are downstream of your insurance business, see how AgentSync can help you keep your distribution channels on the straight and narrow.