Improving the Producer Experience Starts with a Strong Foundation

Insurance compensation platforms improve the producer experience, reduce operating costs, and lay the foundation for future market competition. From a budget perspective it is important to keep in mind that in most cases, the price of not investing in an insurance solution is far more costly than a decision to stay with a legacy platform.

A sound insurance platform is self-correcting and will support reversing and reprocessing concepts to correct prior payments, while also creating an audit trail providing complete clarity on the before and after views, as well as the retroactive change that drove the adjustment.  There are easily hundreds of retroactive scenarios in insurance and the ability to automate processing and provide clarity to the producer community is a critical element to optimizing producer experience.

Carriers are increasing their focus on producer experience through an array of digital tools that offer the promise of reducing friction and improving self-service capabilities. These investments have the potential to deliver significant business value. However, it is important to remember that insurance producers are sellers who sell to be compensated, and without a strong compensation platform, investments that attempt to improve the producer experience will fall well short of the target.

Incentive compensation in insurance is complex—high volume, highly regulated and very competitive. A poorly performing compensation system negatively impacts revenue, operating expenses, and producer mindshare.  And of equal importance, the budgetary impact of an underperforming platform creates opportunity cost that strikes at the very core of improving producer experience, negatively affecting budget and resource availability. 

A strong compensation foundation is the critical building block to improving producer experience as it delivers timely, accurate and transparent payouts. In addition, there are financial benefits that support ongoing investments for improving producer experience which include:

• Eliminating overpayment expense which is estimated to range from 2 to 7% of total compensation paid
• Reducing FTE expense associated with managing producers and paying compensation
• Improving producer mindshare driving new business growth and increased retention

Understanding the key features of an insurance platform

Companies will benefit from an insurance specific platform that can deliver the following functionalities:

1. Producer Management | The carrier to producer relationship imparts a great deal of complexity in insurance compensation affecting every calculation, and must address:

• Producer hierarchies, including multiple hierarchies based on the product being sold, geography or other business rule.  A sound insurance compensation solution must be able to handle hierarchical complexities while still maintaining one primary carrier to producer relationship.
• Regulatory requirements, including producer data that reflects complete compliance profiles and automated validation from the writing agent through the entire hierarchy.
• Special Arrangements, such as policy level advances/chargebacks, loans, draws, commission assignment, ownership splits, debt management and one-off payment arrangements that greatly complicate commission payment and the business relationship. Organizations must have the flexibility to automate processing and to provide accurate and transparent payouts while managing these complexities. 
• Performance Metrics and Supplemental Compensation, provides the flexibility to support client-defined metrics for accurate and transparent bonus calculations and is a critical component of insurance compensation. These metrics are based on summarized data from the producer’s book of business including policy counts, retention, and overall premium performance (ex: new versus renewal premium, book growth).

2. Book of Business management |The producer to customer/policy ownership relationship is also a key component of commission and bonus calculations in insurance, which makes book of business tracking a required feature. Carriers must be able to track and leverage key customer/policy attributes, as well as effective dated ownership records to drive compensation logic. Examples include:

• Identifying the writing agent and the correct hierarchy to support payment calculations
• Leveraging customer or policy attributes (policy type, policy/policy holder age, state, city, zip, effective date) to identify the correct formula for the calculations
• Managing policy level advances and chargebacks including summarizing earned and unearned commissions
• Automating retroactive calculations based on producer ownership changes and/or changes to policy data
• Calculating advanced performance metrics associated to a producer’s book of business (growth, persistency, book value, new versus renewal premium contribution)
• Performing performance-based bonus calculations

3. Compensation | As noted above, insurance compensation requires an advanced rules-based compensation engine tightly integrated with producer management and book of business. Although carrier compensation concepts vary greatly in complexity, a solution that does not incorporate these concepts will present challenges in producing timely, accurate and transparent payouts regardless of plan complexity. 

Additionally, the insurance industry also presents challenges in terms of retroactive adjustments driven by producer management and book of business prior period updates. To be foundationally strong, an insurance compensation platform must fully automate retroactive adjustments for the writing producer and the appropriate upline hierarchy.  Examples of required retro logic include:

• Retro changes to a producer hierarchy
• Retro change to a customer/policy ownership record
• Retro loss of a compliance requirement (i.e. license or appointment)

A sound insurance platform is self-correcting and will support reversing and reprocessing concepts to correct prior payments, while also creating an audit trail providing complete clarity on the before and after views, as well as the retroactive change that drove the adjustment.  There are easily hundreds of retroactive scenarios in insurance and the ability to automate processing and provide clarity to the producer community is a critical element to optimizing producer experience.

Building a business case for investment in an insurance compensation platform

Advanced compensation platforms make it easier for producers to conduct business and get paid. In addition, carriers benefit by streamlining internal processes that make it easier to support producers. These platforms are an investment that ensures cost-effective delivery of services while adding more functionality that supports the producer community. Specific benefits from an advanced insurance compensation platform include:

Making the decision to invest in an advanced insurance compensation platform is a critical first step in improving the producer experience, and fortunately is also supported by an exceptionally strong business case.  A fundamentally sound platform will deliver return on investment from both cost avoidance and increased revenue:

Reducing operational costs.  An underperforming compensation system creates an inverse relationship between operating costs and capabilities and will limit additional investment in improving the producer experience. A strong platform will deliver peak efficiencies that significantly lower operating costs, while also eliminating overpayment expense.  

Increased revenue.  Accurate and well documented payouts greatly improve the trust factor and supports the most critical requirement for increasing producer mind share—compensation.  Confidence in compensation has a proven impact on both new business growth and retention and even minor improvements in this area result in significant impact on revenue. 

Summary

Insurance compensation platforms improve the producer experience, optimize costs, and lay the foundation for future market competition. The reality is that the price of not investing in a full featured insurance compensation platform is far more expensive than the cost of a legacy system replacement.

It’s time to take the next step

A full-featured insurance compensation platform is the foundation for an enhanced producer experience while setting the stage for future growth. OpenSymmetry has the expertise and tools to help industry leaders choose and leverage best-in-class platforms that grow revenue and build value.