Editor’s note: This article was first published in September 2013. It refers to Spanish employment practice at that time, including the commercial contract (contrato mercantil) under which people work as self-employed agents; rules on false self-employment may have changed since.
Working as an insurance salesperson, whether on a company’s payroll or on our own account, can be very profitable in the long run, and it’s rarely viable in the short term (when we start out on our own). Some readers have asked us about companies that offer insurance sales jobs where the first three months are a trial period on a commercial contract (in Spain, a contrato mercantil, under which you work as a self-employed agent rather than an employee). Once those three months are up, they’ll be put on the payroll. The question is whether this kind of offer can be trusted or whether it’s some sort of trick.
On one hand, there are companies that act in good faith, even if they use a commercial contract for an initial period, and, as usually happens, there are also others that play on deception. But first, let’s look at why a company might set these conditions.
Suppose an insurance company is looking for a salesperson. It’s normal for the company to want to be sure that the salesperson or sales rep it’s about to hire is a good professional, and not someone who’s just going to try their luck, collect the first or second month’s pay and then leave. Salespeople like that have cost insurance companies a lot of money, on top of the poor image a company gets from having new faces very often.
In this case it’s perfectly reasonable for them to test the salesperson and set some targets, and if the salesperson meets them and the company is happy with the worker, they’ll go on to offer a contract with a view to keeping them on staff.
Now let’s see how other companies take advantage of that “fake trial period on a commercial contract”.
I know for a fact that some insurance companies work the same way as the old todo a cien bargain shops (Spain’s equivalent of dollar stores): every month they take on salespeople on commercial contracts, with the promise of hiring them once the three months are up. In other words, their business lies in the constant coming and going of new salespeople.
Let’s say they set you a target of 15 policies a month to be hired at the end of the trial period. What will you do in the first month?
What most people do. You’ll sell a policy to your father, another to your mother, to your two best friends, your cousin and maybe to the guy at the café where you have breakfast. That’s exactly what the rest of your new colleagues are doing too. So the following month, you probably won’t hit your target, and you won’t in the third month either (if you even made it past the second). You discover it isn’t for you, and so do your colleagues. You all leave the company, but the company keeps the policies your family and friends signed. The following month a new “batch” of salespeople arrives, and round the wheel goes again.
I also know there are serious companies looking for an experienced salesperson who understands exactly what the job involves. They hire and train that person with the idea that they’ll become part of the company. That way, both company and worker know that selling in this industry will be hard and long-term work, but by laying solid foundations, they’ll have made a good investment in that person.
See also: The toughest negotiation I’ve ever had, and why it somehow worked out
And as a business?
This kind of business can be very profitable in the long run, although it’s one of those businesses you need to start part-time before devoting yourself to it fully. Over time you can build a good client portfolio, and just as with shares, you’ll receive dividends: for every policy held by long-standing clients who stay with you, you’ll receive the renewal payments on those policies or premiums, annually or quarterly.
Some people have built enormous client portfolios, which they’ve gone on to sell to other insurance agents or to large companies. Others eventually set up their own insurance firm.
In the same way, some salespeople have started in this business by directly buying the insurance portfolio of an agent who’s thinking about retiring.
We probably haven’t said anything new, but we hope we’ve at least cleared up the doubts of some readers who asked us about this.
Further reading
- 17 brilliant ideas for business success, by T. Boone Pickens
- 50 quotes from business leaders for entrepreneurs
- If you want to succeed, stop going to the bathroom: Michael Bloomberg’s advice
Featured image: Vachon, John, Public domain, via Wikimedia Commons.
