ICM Technology Considerations for the Insurance Industry
Distribution Management & Incentive Compensation Challenges
ICM TECHNOLOGY CONSIDERATIONS FOR THE INSURANCE INDUSTRY RELATED TO DISTRIBUTION MANAGEMENT & INCENTIVE COMPENSATION CHALLENGES
Incentive compensation in insurance requires an integrated solution that supports producer management, customer/policy management, and transactional and summary level compensation capabilities. General purpose solutions are often challenged to handle the unique complexities of insurance compensation which may limit the number of viable options available.
Managing incentive compensation in the insurance industry has very specific challenges that often tie back to the agents/producers. These challenges include regulatory considerations (validation of licensing, appointments, certifications, etc.) as well as general service level considerations (accuracy, transparency, ease of doing business). For example, it is not uncommon for a single transaction to pay 10 (or more) levels of hierarchical compensation at unique rates while, also accumulating summary performance metrics and validating compliance profiles for each producer being paid. Within each of the areas, the insurance space stands out from other industries as it directly impacts what options are available to firms when they are looking to automate these programs.
Given the need to meet agent/producer service level expectations as well as managing regulatory and compliance requirements, this document will take a closer look at these areas while sharing feedback and guidance as it relates to the potential selection and deployment of an SPM solution.
In this paper, we highlight five prominent challenges to sales incentive compensation in the insurance industry and offer insights into how Sales Performance Management solutions can help address those challenges as well as considerations to ensure selection of the right platform. We hope that these insights will shed some light on the most important considerations for selecting and properly implementing the best application for your needs.
- Producer Management & Compliance
- Tracking Policies & Premium Details
- Crediting & Charge Backs
- Reporting & Analytics (for the producers)
- Data Management
CHALLENGE 1 | Producer Management & Compliance
Producer management is a critical and highly complex requirement for carriers as it has direct impact on onboarding, compensation eligibility, agreements, hierarchical management, debt management and much more. The problem is further magnified by the sheer volume of both active and inactive producer data that must be accurately managed and updated regularly along with maintaining the history. The ability to onboard multiple channels and brokers as well as an in-house sales force, manage correspondence, maintaining licenses and appointments and facilitate the necessary reporting is a key factor in determining a good fit for your situation.
Tracking and ensuring compliance related to paying producers is critical for insurance companies in addition to having that same data accessible through an API or direct source for consumption in other systems. Without the ability to ensure you are paying (or not paying) producers based on their eligibility to sell specific products and policies in a certain region, carriers run the risk having to pay significant financial penalties.
SPM Technology Alignment & Considerations:
Solutions that do support producer management well are not always integrated with a solid compensation system and is an essential component that the SPM providers are trying to solve. Due to the customizable nature of producer management, if you have a homegrown legacy system supporting this it is hard to find a replacement with as many features. It is possible, however, to utilize a separate solution for Producer Management from your compensation for insurance if you are able to integrate it relatively seamlessly and effectively. This specific challenge sheds light on the fact that a generic (one size fits all) solution will likely not meet your needs.
If producer management is in scope, it will be very important to ensure your requirements around this challenge can be documented and communicated to any vendor you engage as it relates to a solution review. However, if you simply need to connect your Producer Management platform, the field for incentive compensation solutions will open up a bit from an options standpoint, but it will still require a close look at
the vendors to ensure they can integrate natively and/or have examples of clients where they have. Care is required when identifying the right fit for your organization.
CHALLENGE 2 | Tracking Policies & Premium Details
To accurately pay sales compensation within the insurance space, firms do not have the luxury of summarizing customer payment data, but instead will need to track the producer relationship to a book of business at a policy level and the premium activity associated to that policy. Commission payment will be dependent upon the solutions ability to handle transactional calculations based on paid premiums at the policy level. Payments must also be distributed across complex direct and indirect hierarchies which often results in a single premium transaction paying anywhere from 3 to 10 (or more) producers.
Factors contributing to the complexity include the type of premium (new/renewal), issue date and premium effective dates, any potential advance commissions paid, policy changes, terminations and more. Given the high-volume nature of insurance it is critical that the solution support policy level calculations and retroactive adjustments in a fully automated manner while also storing multiple years of history for regulatory purposes, retro calculations, and reporting.
SPM Technology Alignment & Considerations:
While some of the larger/older solutions do provide transactional processing, this is not a capability that is often requested and as such should invoke closer review by a firm looking into SPM solutions. And although insurance focused SPM platforms will typically have this capability (as they very much understand this requirement), they may not do a great job of tying this information into a reporting or analytics solution that would then be made available to the producers, management and the admin team.
CHALLENGE 3 | Crediting & Charge Backs
It is common for producers to have multiple roles, product or geographic hierarchies in place simultaneously, while also requiring tracking of historical hierarchies for retroactive processing. It becomes even more challenging when you fold in compliance and eligibility rules across the hierarchy which in effect requires a fully automated self-correcting platform.
Crediting can be very challenging in insurance due to the need to handle transactional level processing while also factoring in the complexities of producer and policy management. Additionally, insurance has more potential for retroactive adjustments than most industries which must be fully automated to ensure accuracy and regulatory compliance.
Retroactivity can be as simple as a “charge back” for a policy that termed in less than 90 days or can be far more complex in terms of the need to recapture payments made incorrectly based on any number of critical effective dated logic (retro license termination, retro change in hierarchy, retro policy ownership change, annualized premium not collected, etc.). Automated retroactive processing (and audit trails) in insurance is a critical component of feeling confident in the accuracy of payments and delivering maximum return on investment.
SPM Technology Alignment & Considerations:
Some key advantages to some of the more robust SPM solutions (not just insurance specific) include their ability to handle:
• Highly complex crediting logic and assignments
• High volumes of data
• Policy and participant level tracking and reporting
• Various types of data sources that provide the measures needed for crediting
Though not all systems are up for this challenge, there are a number of SPM solutions that have demonstrated the ability to manage complex crediting with high volumes successfully for large insurance companies (e.g. over 10k producers) at the transaction line level. Over time, these solutions have developed robust capabilities through advanced data management (e.g. ETL) and crediting logic capable of handing the most complicated scenarios. This includes efficient and accurate crediting on an ongoing basis, the ability to alter crediting rules to accommodate changes in plans, agreements or subsequent crediting logic and the ability to adjust credits systematically and exceptionally as needed.
CHALLENGE 4 | Reporting & Analytics (for the producers)
Understanding that producers (if they become unhappy) can either leave with their book of business or reduce new business focus with the carrier… it is an on-going effort to improve the producers’ experience. A key element to support producer satisfaction is transparency which is best managed by providing clear, concise and accurate reporting breaking our new versus renewal commissions, key bonus metrics, book of busines views and compliance profiles. Many companies are hyper focused on providing a good experience, carriers constantly struggle to organize data (e.g. transaction line level data) in a way that can be viewed by both the producers and the managers.
Reporting focuses on:
• Clearly identifying the business, channel and products that are being paid
• Timeline data and milestones; year to date, target levels and achievement
• Quick and easy access to participant and customer views and book of business data
• Summary levels and team views
• Program/Plan performance
• Policy renewal details for client contact and reminders
• Ability to extract data to load to a CRM or spreadsheet for more sophisticated producers and agencies
SPM Technology Alignment & Considerations:
Assuming the underlying data is accurate and complete, and the SPM solution is configured appropriately, SPM solutions available on the market can deliver rich data sets that can be tailored for the specific users within an organization. Over the last 20 years, SPM vendors have advanced their capabilities to deliver extremely insightful dashboards and intelligent analytics to support not only performance management but also ensure strategy decisions are supported by relevant data. With these advancements, producers and managers can leverage drill-down capabilities within reports to see both summarized and highly detailed information regarding their commissions. As most of these systems are also highly configurable, clients have the ability to customize prebuilt reports or create new ones from scratch.
While there are advantages to leveraging an Insurance focused SPM solution, many of the top solutions can handle Insurance reporting/analytics needs if they are configured correctly and with an expectation of tracking/paying at the transaction line level.
CHALLENGE 5 | Data Management
Data needed to support the inherent complexities of paying agent commissions can be substantial. Often, systems/programs/outside suppliers will need to have a full integrated and automated data strategy that will support on-going processing of compensation with the additional need to perform historical look ups and maintain accurate calculations of compensation. Tracking the volume of contracts, policy and/or participant level information is challenging and requires detailed planning and a solid design. The data is required to be used not only in incentive compensation processing but in the detailed reporting, tracking of changes, and consumption via API or direct feed within the company.
SPM Technology Alignment & Considerations:
Given the requirements around data automation across various source systems, it is critical to assess the vendor’s experience connecting their system to source systems within the insurance space. While some solutions provide standardized integration capabilities, these should be reviewed closely to ensure capabilities or alignment and management of data being provided through insurance specific sources. The solutions must be able to provide the ability to look back at effective dated detail, summarized data and process changes retroactively in a clean efficient manner. Compensation solutions are primarily driven and track activity at a payee/agent/broker level and the need for policy, contract holder data is not often easy to manage. Keeping this in mind as you look for a suitable solution will aid you in your selection.
SUMMARY
The challenges discussed in this paper for insurance often present difficulties for SPM solutions since they are not well designed specifically for the insurance industry given that are they are built for a variety of industry verticals. These challenges are managed differently from company to company and finding the right solution may look different from one company to another.
While considering a SPM solution for insurance, keep in mind the needs and challenges to support producer management, compliance, premium tracking, credit and charge backs, reporting and analytics, and data integration. Each solution will manage these differently and diligence should be taken to determine what the best set up is that suits your needs.
Want The PDF Version?
About Us
OpenSymmetry enables clients to achieve greater operational efficiency and get better sales results. We are a global consulting company specializing in the planning, implementation, and optimization of industry leading technology suppliers of sales performance management solutions.
CONSIDERATIONS WHEN REPLACING YOUR SPM TECHNOLOGY SOLUTION
Understanding the challenges companies face when migrating Sales Performance Management (SPM) technology solutions can be a significant undertaking. This paper is designed to provide high-level guidance to stakeholders who carry this responsibility. As OpenSymmetry has helped many companies evaluate and effectively migrate to new technology solutions, we are sharing seven key areas that we find critical to completing this kind of effort.
1. CURRENT STATE ASSESSMENT & FUTURE STATE PLANNING
A critical initial step before migrating to a new SPM solution is understanding how well your current program is performing across people, processes, and technology. From there you can devise a future state vision for how your SPM program should operate. By understanding both current state gaps and what your future state needs look like, you can effectively begin defining requirements while also clearly articulating success criteria. It’s important to recognize that your previous or initial SPM implementation may not have gathered all necessary processes/requirements, so it’s vital to take a fresh, holistic view in this first step.
2. DATA INTEGRATION
One of the most complex and time-consuming requirements is determining how to best leverage current source data feeds to support the new platform. Within the context of your current state assessment and future state planning, the team should review what their reporting, analytics, and any future state compensation elements needs are to ensure a meaningful inventory of data requirements are defined. SPM solutions vary in terms of how data is gathered, translated, and uploaded into the system. Some solution applications may have a standardized format requiring additional configuration, whereas others may have the ability of data field mapping, which provides additional flexibility. The ability to own the data translation from your source systems to the SPM platform is key. Another focus point is to ensure that you evaluate all manual feeds to incorporate automation, as well as any additional error validation processes.
3. HISTORICAL DATA
Migrating historical data is an often-overlooked requirement when moving from one SPM platform to another. To keep costs down and minimize complexity, clients may want to ID only the data that is needed to ensure ongoing management of comp (e.g. payment history) and then transfer detail-level data into data storage to be referenced at a future date. It is important to consider what historical data is needed for the new system for reference on future payments
4. PROCESS IMPROVEMENT
Each SPM solution may require users to interact with the system in different ways. This area may need additional attention, especially as it has the potential to improve processes currently employed to manage sales compensation. Understanding the impact a new system will have on current processes, as well as those who manage the processes, is critical to ensuring a successful launch and ongoing management of core processes. As an example, two of the leading solutions in the market have very different expectations regarding the skills users need to possess to effectively maintain compensation plans and reports and, in some cases, execute the day-to-day activities. Defining expectations of your staff related to the new technology, prior to the project, will ideally give your organization the necessary time to introduce training that ensures effective ongoing management of the program.
5. WORKFLOW
SPM solutions vary widely in their ability to support automated workflow. As a result, there are significant challenges for sales compensation teams related to an SPM migration. Capabilities can range from templates to existing documentation, levels of routing, and even implementation of a stopgap for a payee to accept plan documentation prior to payout. Within the context of your future state definition, capturing and defining areas where automated workflows can be leveraged is a necessary part of the core requirements. Before a new system is deployed, it is important to map these processes out to drive user adoption, leverage the SPM system as an auditable repository, and minimize email management.
6. REPORTING & ANALYTICS
It is critical to develop a holistic vision of information distribution to the various stakeholders and tools used to deliver this content (i.e. static pages vs. dashboards). Similar to workflows, different vendors have various capabilities related to reporting for the end users. Assessing these capabilities against your business requirements is imperative to the success of the roll-out. For example, some vendors require more robust configurations in the system (e.g. crediting logic) to enable specific analytics capabilities, while some solutions, architected specifically for reporting and analytics, have much more robust capabilities. Another area for consideration is the use of the vendor’s reporting solution against your in-house technology stack. Some solutions make it easy to port data into new environments, which could be a consideration in helping to keep the number of reporting tools requiring management to a minimum.
7. DEPLOYMENT
The implementation of a new solution should be designed to minimize the impact on payees and managers. One of the most critical aspects of your effort is assessing how all stakeholders will be impacted and how to mitigate any disruption. It is important to identify upcoming changes for your sales organization, administrators, and other internal partners with a plan in place to offer the steps needed to ensure the best chances for solution adoption.
The first step when considering a new SPM platform is an assessment of your current program and the development of a future state vision. OpenSymmetry offers a no-cost workshop to help you gain an understanding of how your current SPM program performs against your needs and industry best practices, as well as a readout on current solutions in the market.
Leveraging the OpenSymmetry assessment methodology and knowledge of the leading SPM providers, you will be equipped with:
• A current state analysis scorecard
• The framework for a business case to support change
• Contemporary intel on the SPM market and SPM vendor capabilities
• High-level deployment and license cost estimates