‘Low Maintenance’ Producers Can Pull In Higher Commissions
If given the choice, would successful fixed annuity producers sacrifice product support for additional compensation? Exclusive Producers Network is betting they would.
“If you’re willing to get your assistance on the Web, then we’re willing to pay you more because you’re low maintenance,” says Shelby Smith, a vice president and advisor to Exclusive Producers Network, Houston, Tx.
Exclusive Producers Network (ePN) is a marketing organization that provides agents with fixed annuity products from a number of different carriers. All product support is done on their Web site. There are no toll-free numbers to call, nobody to talk with. Instead, support is handled online, and when personal support is needed, agents can use the chat feature to interact with a live person.
“We are strictly Internet based; its a business to business Internet portal,” says Smith. “We offer all of our support and all of our products on our Internet site.”
Smith contends that agents who become members of ePN’s organization will earn higher commissions by sharing in ePN’s national override commission.
“We’re targeting the independent insurance agent who offers fixed annuities and is on the high end of the production scale,” continues Smith. “We want to see $50,000 a year or more in income from fixed annuities.”
Smith describes the type of producer he expects to become a member: “In the real world the agent who’s been selling fixed annuities for 20 years and makes $100,000 a year, he gets a street level commission.
“He’s been doing it so long, that he requires absolutely no handholding,” he says.
“So what we’re saying is let’s put everything on one Web site and attract the prolific producer that needs no handholding and pay him a higher commission,” continues Smith.
On the other hand, he describes the type of agent ePN is not targeting–the agent who requires a substantial amount of support. “He always calls the home office, he wants illustrations, he has to have forms federal expressed to him and they [home office] have no idea if he’s going to be productive or not.”
Smith says that its the experienced producer who doesn’t need a lot of support that ePN wants to work with. “You make us a low cost distributor, and we’ll pass some of those savings on to you [the agent],” he says.
ePN says it can afford to pay out a higher commission because of the low cost structure of the organization. Since most of the costs are incurred up front to set up the Web site with product information, forms, etc., the spreads needed to cover expenses are very small, it says.
“Once that is loaded it becomes almost a zero variable cost,” Smith explains. “The only time we’re going to be in direct contact with an agent is through a live chat–there’s no phone number to call, everything we get from the carrier commission-wise is all digital, and there just isn’t much overhead,” he says.
“We can operate in that very rare atmosphere of a thin spread,” says Smith.
The average increase in compensation an agent would see is a little more than 1%, depending on the amount of business placed, says Smith.
He notes that there are three breakpoint levels based on commission: $50,000, $100,000, and $250,000.
“We’re getting a lot of inquiries from producers that are saying ‘Wow, you’re willing to pay me a point and a quarter more than I’m currently getting from my marketing company. How can I do business with you?’” he says.
ePN currently has 7 active carriers making their fixed annuity products available to agents and is reviewing 2 more carriers.
While fixed annuities are the only product type currently available, Smith says there are plans to offer additional types of traditional insurance products in the future. “Obviously the timeline is contingent upon how well we do with fixed annuities.”
Smith notes that with traditional insurance products there are many producer groups that allow agents to receive the maximum compensation, thus hindering their ability to penetrate that market.
“We probably see a better market in LTC, critical illness, and other types of products where there doesn’t seem to be as much organization among the agents,” he says.
Smith says that over a five-year period, ePN anticipates attracting only 4,500 producers. “Thats out of a possible universe of a little over 100,000 that we’ve identified who make $50,000 and over a year with fixed annuities,” says Smith.
“With those 4,500 agents, we believe that if they all meet the minimum, we’ll produce about a billion dollars a year in fixed annuities.”
EPN’s Web site is www.epnusa.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, December 10, 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.