3 Obstacles to Just-In-Time Appointments (and How Carriers Can Overcome Them)
May 17, 2021
Most states that require carrier appointments have what are called Just-In-Time (JIT) appointments – it’s a legal provision that lets the carriers wait to fully execute an appointment (and the associated fees) until the agent has actually written business in the state.
The point is to give carriers this option for increasing distribution without breaking the bank, and doesn’t necessitate them taking on all of the responsibilities for agents who aren’t actually writing business for them. Because AgentSync Manage is designed to cut down on lag times in the appointment process, it can really help take advantage of JIT appointments out of the box.
Unfortunately, we only have a few customers who are leveraging JIT appointment capabilities. Those customers are saving thousands of dollars in appointment fees. If more companies embraced JIT appointments, they too could see more distributors, better margins, and the opportunity to rethink agent recruiting.
In my view, there are really three reasons JIT appointments haven’t caught on in the last 20 years:
- Level of sophistication required
- Misperception of JIT appointments as a “loophole”
- Skepticism of the outsized cost savings
1. Achieving tech sophistication for JIT appointments
So, the basic premise of the JIT appointment is that a carrier or MGA can recruit its agents, onboard them – background checks, E&O policies on file, W-9s, etc. – but wait until the producer submits business to submit the carrier appointment and fees to the state.
States that allow JIT appointments generally require the appointments to be made within 14 to 45 days of the agent submitting their first piece of business, although some states vary on interpretation over whether the triggering date is the date the business was written, the date it was submitted, or the date it became effective.
Because of these timelines and variables between the states, carriers don’t have a lot of room for error. If they aren’t managing their licensing with software, it can be almost impossible for them to take advantage of this JIT allowance because it is so complex. A carrier may have a policy administration system, a licensure system, and a producer management system, and all of them need to be “talking” to each other to be able to meet these timelines effectively.
Instead, what we see is that this process ends up being painstakingly manual. Some of the carriers that don’t have good integrations often have someone on staff who spends part of their week just looking back and forth between the different systems. There are entire teams of people who make this happen through comparing data back and forth to catch new business from agents who may need JIT appointments – not really cost effective and prone to error.
With AgentSync’s integrations [link to Taking Advantage of JIT piece], we can tie those systems together so that the softwares coordinates alerts and automatically submits appointments ‘just in time’. Having an appointment automatically triggered when a producer submits their first piece of business in the respective state eliminates the guesswork.
2. Addressing JIT appointments as more than a “loophole”
In my experience, most carriers are aware of state regulations surrounding JIT appointments, but often they think of them as loopholes. Carriers’ legal teams will advise that they go ahead and appoint all recruits during onboarding just to be safe. However, why accept legal responsibility for an agent who isn’t even writing business for you?
Unfortunately, these legal teams see JIT appointments as only a plan B; an option to cover them in case license renewal and subsequent appointment timelines get messy. But it’s clear that JIT appointments are a perfectly legal plan A.
According to the Securities and Insurance Licensing Association, one of the main objectives of JIT appointments is to provide a mechanism that reduces costs for carriers because “a high percentage of producers who request appointments fail to make a sale.”
Having attended numerous industry conferences, I’ve also heard from insurance commissioners that represent JIT states. They are generally supportive of JIT measures as a legal first option, and see them providing potential cost-saving advantages for recruiting.
3. Realize the possible cost savings of JIT appointments
The real proposition here is that insurance carriers could save thousands of dollars with JIT appointments. State fees for appointments range from $0 (Hawaii) to $75 (Massachusetts) per producer per year. Now, this isn’t including any associated state processing fees, or Florida’s per-county appointment fees [insert link to Regina’s next blog lol]. But using $20 as an average, we can look at the costs insurance carriers pay for appointments.
Let’s say a carrier recruits 100 producers to sell in five states. If we use that $20 average, we get something like:
100 x 5 x $20
That puts the annual costs of appointing all those agents in those states at $10,000.
Almost all carriers will pay to appoint those agents upfront. But the insurance industry has a very high rate of producer dropout – most estimates say 50 to 80 percent of new producers leave the industry. And even agents with successful track records won’t necessarily write business in every state for a particular carrier.
Even so, we’ll stay fairly conservative here:
Using 100 recruited producers for our example, let’s say 40 of them submit business in the first year (likely they haven’t submitted business in all five states, but still, they’ve submitted something). In the second year, let’s say another 40 producers have submitted business. However, that still leaves 20 agents who will never submit business in any of their appointed states (and, as we said before, that’s a pretty conservative estimate).
So, of that $10,000 in appointment fees in the first year, the carrier might as well have flushed at least $2,000.
But these are thousands of dollars for 100 agents in five states. Many carriers are dealing with closer to 100 or 1,000 times those producer volumes.
Career insurance administrators and compliance operators know about this regulation, but they don’t know how to operationalize it and often lack the resources to do so. To use our example at a more realistic scale, using JIT appointments for 25,000 active agents, the carrier would save a minimum of $500,000 assuming 80 percent of them wrote business.
If more brave carriers and MGAs seriously considered these potential savings, it is easy to make the case to prioritize the investment in business process automation – taking full advantage of this legal strategy. If you’re ready to find out how AgentSync can help, check out the demo on our Carrier page.