Pru Program Lets Agents Earn Ownership In Their Book Of Business

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“We’ve been keeping this quiet because we feel it’s a real competitive advantage,” says Thomas Crawford, president of Prudential Retail Distribution, Newark, N.J.

What Crawford is referring to is Prudential Life Insurance Company’s recent introduction of a new premier producer program which, among other producer benefits, gives agents an ownership position in their book of business.

“One of the problems with a career agency system is the agent doesn’t have any ownership,” he says. “Now, ownership is in the hands of the agent.”

Under the new program, agents have the opportunity to buy or sell their book of business to another producer. For a negotiated price, agents can transfer their book of business, making the renewal streams payable to a successor agent, says Crawford.

“We talk about business succession planning every day,” says J. Stan Montgomery, a veteran Prudential agent from Montgomery, Ala. “Now we can apply it to our own firm.”

Succession planning for life insurance professionals has been a real problem, industry experts say, adding that most producers have no formal succession plan.

Montgomery tells an all-too-familiar story of a former mentor whose book of business was neglected upon his death. “I had a friend who had built his business for 35 years, and after his death his business evaporated,” explains Montgomery.

“This is a shame for the client, a shame for the company, and a shame for all the hard work he had done building that business,” he continues. “Now, everyone can win with a succession plan.”

Crawford feels that the steps Prudential has taken will be followed by others.

“This is a very unique program,” says Crawford. “When you develop something that’s successful, you’re going to get some companies following it.”

According to Crawford, Prudential “wanted to do something that would help the consumer, help the agent, and help the company.”

Typically, when an agent dies or leaves the business, the client becomes an ‘orphan,’ and is assigned to another agent.

“The biggest benefit to the client is the continuity of service,” says Montgomery. In the past, servicing orphan business was a moral obligation, he says. Under this new program, agents will be compensated for servicing the business. “Now clients will be working with someone who knows the product, knows the company, and gets compensated for working with them,” he says.

“This will benefit any client,” says Montgomery. “Especially those with more sophisticated needs and programs. These clients will always have somebody there.”

Crawford notes that when an agent sells his book of business, he also transfers the goodwill the agency has built in the community.

“The goodwill is transferable, and the quality and continuation of service to the customer will help improve persistency,” says Crawford.

Agencies will be valued based on the renewals of the business, goodwill, and the future revenue generated by the business. “When buying an agency, you buy a future income stream of the business,” says Crawford.

While Prudential must approve every transfer, the sale price is left up to the agents. “We’ll create a model for people, but when it comes down to it, it’s in the hands of the agent,” says Crawford. “We feel the agent is a small business entrepreneur.”

“This program is something we’ve been building over the last few years,” says Crawford. “We have an agent advisory committee that worked with us in the development of the program; there was a lot of input from the field.”

“This was a long time in the making,” notes Montgomery.

Montgomery, a member of the agent advisory committee working on the program, says, “The group was wisely designed, we used people from the district offices, ordinary agencies, and we also used people who were strictly financial planners.”

“When we developed this contract, we wanted to look at it from every possible marketing opportunity’s perspective,” says Montgomery.

“The practice transfer privilege is the lead piece of the program,” he continues.

But, according to Crawford, “the program has a lot more than succession rights.”

Prudential also wanted to remove the inconsistency in agent compensation, rewarding agents for performance based on factors other than first-year commissions, says Crawford. “We now pay bonuses based on the entire revenue generated by the agency.”

Montgomery feels this is an attractive feature that will help young agents as they build their business. “In 30 years, I had 2 off years where it was a real challenge to manage my business. This contract helps an agent feel more stable since it’s not only based on first-year commission.”

Montgomery explains that the new bonus plan takes other elements into consideration, such as growth of business, mix of products sold, and persistency.

Prudential currently has about 850 agents enrolled in its premier producer program. Crawford expects about 50%-75% of all Prudential agents to be involved in the program over the next few years.

In order to qualify for the program, agents must meet certain commission levels, says Crawford.

“These are similar to MDRT levels,” he says. “Agents can do it in 2-3 years of coming to Prudential.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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