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Originally Posted On: https://e123insurtech.com/insurance-innovation/ways-commission-management-drives-roi
Four Ways Commission Management Drives Positive ROI
Today’s insurance agents expect carriers to provide tech-enabled solutions to streamline and simplify their business. As a carrier, you must meet agent needs, including providing a digital commission solution with flexibility, transparency, and accurate reporting, to attract and retain the best agents. The return on investment (ROI) for a modern commission management solution goes beyond just cost savings. Superior commission management is a revenue driver since the strongest producers routinely tell us they prioritize carriers that are easier to do business with.
What drives positive ROI for commission solutions? It’s actually pretty simple.
Attract: Increase Your Agent Footprint
To increase distribution and sales as a carrier, you need to attract top-performing agents. Not surprisingly, the best agents want to work with carriers that pay accurate and timely commissions. Since so many carriers struggle to do so, those who do invest in commission management will increase their agent footprint, and subsequently sales.
Imagine that you have 10,000 agents selling 10 policies annually, which is a total of 100,000 policies per year. Having an advanced commission solution that pays agents the way they expect to be paid will easily attract new agents. Now assume you add 2,000 new producers that are already strong performers, so they will begin contributing immediately. This will increase your output by 20%, resulting in 120,000 policies sold annually.
In research conducted by Highpoint Associates, one regional carrier said “Erosion of goodwill is a huge cost. Brokers/agents become agitated and de-motivated when commissions are underpaid, or erroneous. Brokers gravitate to carriers who are easiest to work with and most accurate on commission payouts.”
Motivate: Get Current Agents to Sell More
Agents usually sell multiple products across numerous carriers. The products they choose to promote and push to customers are influenced not just by customer need, but also by their satisfaction with the carrier. And the research is clear that agents are demanding flexible and transparent commissions from carriers.
“Underpayment creates a loss of goodwill with the sales staff and can influence agents/brokers sales incentives and carriers’ market reputations,” according to one regional carrier.
Investing in a commission solution will drive both agent satisfaction and motivation, which can directly impact sales. The right commission management tool will give you the opportunity to test different incentive structures to determine the best motivators of agent behavior, which can then drive sales strategy. 76% of agents would sell more for carriers that are easy to do business with, so if 76% of your agents were motivated to sell even just one more policy a year, that alone would generate 7.6% more in sales.
Retain: Reduce Agent Attrition
Just as agents want to work for carriers that are easy to do business with, they don’t want to work with those who aren’t. Payment delays and errors mean you’re not meeting your agents’ needs and this can lead to attrition, particularly among your best producers.
Losing top agents is problematic as you then need to spend time finding, contracting, and onboarding new agents, which means less time selling as new agents ramp up. It’s not uncommon to see attrition rates as high as 30% for carriers that aren’t meeting agent needs. Assuming you have 10,000 agents selling an average of 10 policies per year, this could translate to 30,000 policies lost. Even if you’re able to immediately replace those agents, you will likely still lose 7.5% in sales due to training and ramp-up time.
Investing in a new commission system will minimize turnover, allowing you to retain the best agents and focus on driving more revenue.
Increased Cost Savings & Efficiencies
Beyond revenue growth, investing in a digital commission solution can also create significant cost savings and efficiencies by reducing manual processes and errors from workarounds, and decreasing the amount of time and resources spent to identify and correct commission errors. This means less calls and complaints from agents and refocusing your time on more value-added activities.
The Market President of a national carrier said, “With any of these processes, the current operation impacts your cost structure, which impacts your pricing, which then drives your market competitiveness and topline. Getting this right is incredibly important, and investing to reduce your variable costs can be very high ROl.”
Drive Positive ROI with the Right Investment
Make commissions a competitive advantage instead of a business disruptor. e123’s Commissions for Carriers makes accurate, timely, transparent, and flexible commissions possible. Learn more.
