Brokers Get Paid For The Work They Don’t Do

Driving across town to earn $87,000 is one hell of a way to make living…………..

By Bill Rusteberg

A Texas political subdivision with 250 employees goes out for Request for Proposals (RFP) for their fully-insured group medical plan. This case historically has never employed an Agent of Record and instead has dealt directly with the carriers. They have found the carriers provide all the services they need, including on-site customer service when required and assistance with annual enrollment meetings.

Agent Joe “Lazy” Bones saw the RFP announcement in the local paper so he runs down to the group to pick up the RFP specifications. He then drives across town to the Humana sales office to log in a request for proposal on behalf of the group.

Humana gets right on it. They evaluate the risk, cobble together a fancy proposal along with a sample reporting package, references and all the other things a potential buyer would find compelling in their decision making process.

Unlike Joe, Humana actually read the RFP. They noticed the group historically eschewed brokers and dealt directly with their carrier of choice. They noticed the RFP stipulated carriers should quote net of commission on a direct basis or with disclosed commissions if through a broker.

Humana calls the group and asks “We got your RFP through an agent. Should we quote through him or would you prefer to work directly with us?”

“It’s up to you” was the reply.

Humana submitted two proposals by the RFP deadline. One was direct and the other was through Joe. Joe didn’t even get a copy of the proposal until after the proposal deadline. That was for good reason as Humana¬† feared he would share their bid with his favorite carrier of choice paying him the most.

Joe’s investment in time and effort at this point amounted to a 15 minute drive across town.

The Humana annual pricing differential was $87,000. This amount represented agent commissions all as a result of a 15 minute drive across town.

Humana was awarded the business on a direct basis, saving the group $87,000 in agent commissions. Humana’s local office provided all the service the group needed, even on-site customer service as required.

Poor Joe didn’t get the case but he got others to make up for it. One is a large political subdivision he placed with Blue Cross. His disclosed earnings are in the median to high six figures. BCBS provides 100% of all serving needs including an on-site customer service representative leaving Joe with plenty of time to play golf and check his mailbox.

All Joe had to do to earn this business was to pick up the RFP package and drive it across town………….

All this reminds us of Uncle Miltie back in the 80’s. An aging Houston insurance agent, Uncle Miltie would go down to the Houston public library and read all the newspapers from across the state looking for advertisements for RFP’s. He would then contact the group, request they send the RFP overnight which he would pre-pay for them. Then he would send the RFP to every carrier active in the market in an attempt to lock up as many markets as he could.

His time and investment was substantially more than Joe’s as Uncle Miltie would attend every RFP opening no matter where it was in Texas. He would drive in the day before in his station wagon, find an appropriate parking place, then settle in for the night in the back of his “mobile” office.

I can’t count the number of times I would arrive for an RFP opening and find Uncle Miltie brushing his teeth and combing his hair in the parking lot after a restful night in the back of his mobile office.

Uncle Miltie’s shotgun approach paid off big for him. He even got a large state insurance contract. Once a sale was made his job was over and the mailbox money rolled in like clock work. The only problem is he had to drive a bit longer than modern day Joe.

The Uncle Miltie approach to insurance sales continues to this day………………….How sweet it is!

Note: Joe L. Bones is a fictitious character, Milton Godwin (Uncle Miltie) is not.



It’s amazing these creatures still exist. There is no way they can justify their commissions and there is no way most employers would agree to pay anyone $87,000 for driving across town if they knew the truth.