Internet Tools Can Lower Costs And Increase Compensation
By Shelby Smith
How much value does your distributor/carrier add to your sales process? You may not even realize it, but you are likely paying for their support, service and advice whether you use it or not–since producers generally receive the same commission regardless of the support resources used.
Would you be willing to forego access to them for higher compensation? Historically, this option has not been available because the cost effectiveness of producers was not considered–but times are changing. Recent developments indicate that this level commission structure may be eroding as communication tools advance.
What Your Peers Are Reading
This “one commission fits all” legacy is a strategy advocated by carriers, and heartily endorsed by most distributors, to assure a commission-neutral playing field to discourage producer migration in search of higher compensation. If there is a compensation gradient, it is based on absolute production, rather than the cost of production.
In fact, no insurance carrier knows the cost of sales by producer, only the amount of sales. The periodic winnowing of producers by carriers is based on their volume of production, never on the cost of processing that production.
Likewise, incentives are invariably based on volume, never cost. Cost-efficient producers deserve higher compensation relative to their cost-inefficient counterparts simply because they add more to the bottom line of their distributors and carriers. Since measurement by a functional cost accounting system is not practical, is there another solution with the tools we have?
The Internet holds this solution. This medium is a valuable tool for the insurance industry and is being used in innovative and productive ways. In fact, most carriers and distributors provide online all the forms, product information, premium rates, training materials, production history, customer account information, commission accounting, business tracking, and everything else needed by experienced producers.
Producers are rarely given a monetary incentive to use these zero marginal cost tools that are a point and click away, nor are they penalized for continuing to use distributor/home office resources to do business the traditional way.