Quickest Way to Raise Agents’ Ire

By | September 9, 2013

What is the quickest way a consultant can raise the ire of agents everywhere? Write an article stating producers have a responsibility to produce.

What is the next best way to raise agents’ ire? Write an article that producers should not be given any call-in or walk-in business, nor should they be given accounts that CSRs are currently already servicing and are perfectly capable of servicing in the future.

Many readers will think these points are so incredibly obvious they do not see the point of even writing about them. To these readers, you have a great advantage because so many of your peers completely disagree.

Here are some examples of comments I have received that clearly raised the ire of some agency owners and producers.

A producer’s job is to produce. Period. Quality is important, but only if sales are generated first.

One agency owner accused me of creating a rebellion (his word) among his CSRs because after reading my article and realizing they were doing the agency’s producers’ work but the producers were being paid, they demanded to be compensated for their sales. They had figured out they sold more than the producers, while servicing their respective books and the producers’ books, but the producers were given all the credit and paid as if all sales were generated by the producers.

I seriously doubt I created a rebellion. Grossly unfair policy is almost always the root cause of rebellions. Not only was this gentleman practicing poor human resource policy, he was making a horrendous business decision. Why even employ producers that sell less than the agency’s CSRs?

Asking such a question is heretical in their world. I have been fired from consulting jobs for asking that single question in agencies where the producers do not produce. The owners take great pride in paying these nonproducing producers a great deal of money with no results required. The owners like the atmosphere this scenario creates. As one insurance consultant once wrote, at the heart of the matter, they like having a kingdom and knights that cannot fight better than no knights at all.

Emotionally, I truly believe they are indeed happier with producers who do not and cannot produce rather than no producers. Happiness is worth a fortune so their decision is actually quite reasonable. I just do not see this industry remaining fat enough to maintain this welfare system. A key reason many agencies must sell is because for them to afford producers at the going rate, the agency has to grow and/or be far more profitable than normal. What happens to growth and profit when employing producers who do not produce?

Producers who respond with anger to that question do not even know they are telling the world they cannot produce. I’ve received responses such as, “production is a hard job so producers should be cut some slack” and “maybe CSRs’ compensation should be cut to make CSRs more productive and leave the producers alone.” I totally understand how difficult the job is. But how difficult the job happens to be is beside the point. As Zig Zigler aptly stated, “Too many people substitute effort for accomplishment.”

A Producer’s Job

These “producers” make the same points in an effort to change the sensitive subject of their production.

A producer’s job is to produce. Period. Quality is important, but only if sales are generated first. Retention is important, but only if sales are generated first. A person can tell the world that building relationships and going to meetings and coaching insureds and working with underwriters and joining civic clubs are important, and they are, but only if they lead to sales.

Some agency owners and producers claim their job is to service. Servicing clients is indeed an important job, but the term “service” is unfortunately, for effective measures, ambiguous. The reality is that most service work is done or can be done by quality CSRs on at least 75 percent of a typical agency’s accounts.

Large, more complex accounts do require a producer’s involvement, but quite frankly, most producers fail in this instance, too. They fail because 90 percent of these producers do not use coverage checklists so the value of any expertise they bring is limited. Coverage checklists are one of the very best tools for selling and one of the very best tools for making sure clients get the coverage they need. And yet, these kinds of producers almost invariably fail to use them.

Another claim is that it is insulting to these producers to think they just sit around waiting for business to walk in the door. I am not sure what many producers are doing with their time other than waiting for business to arrive because their results surely do not show they are selling.

At $200,000 commission to the agency at an average of $1,000 per account, the producer will have 200 accounts — one renewal per day. That leaves many hours and days for selling.

If retention is 90 percent and growth is 5 percent, then only 23 new accounts per year must be written. This is only one account every other week. While not a walk in the park, it is completely feasible and if the goal is $2,000 per account, then it is only 12 accounts per year, one a month. Writing one new account per month certainly seems like a reasonable requirement.

Others sadly just cannot do the math. They seem to think they are getting a raw deal because they only get 40 percent (or whatever their particular commission rate is) of the 12.5 percent, for example, the agency receives as its commission on the premium. So here is the math.

They are upset at getting only 5 percent (12.5 percent times 40 percent) of the premium. At 30 percent, this equals 3.8 percent of the premium. Somehow or another, they think they should be paid the entire 40 percent of the premium (even though the agency only gets 12.5 percent), not 40 percent of the commission the agency earns! (For those readers whose jaws are on the floor, please be assured I am not making this up. I am not that creative.)

These same people then opine that to make up the difference, the agency should just pay the CSRs less.

Keep in mind the beauty of their argument. If CSRs are paid less, they will usually do less, meaning the producers will have to service more and therefore, they will have a better excuse for not selling!

If you are a producer and want a pay raise, you are in an incredibly fortunate job because it is one of the few jobs for which you can get a raise without asking the boss for more money. Just go out and sell more!

Here are some facts. At 40 percent, producer compensation is by far the biggest cost an agency has on any single account. On a book of $150,000, the producer’s cost including typical benefits is $75,000 to $80,000. The fact is the median producer in this industry generates approximately $200,000 of commissions to their agency. This is not producing, not when mediocre producers generate $300,000 and not when good producers can generate at least $500,000 in commissions in any location in North America (they may have to travel to do it, but no rules exist saying a producer cannot travel).

The Challenge

This article will upset many people. These people are likely in the wrong job or the wrong industry for these times. They are probably already challenged and scared.

One solution is to make sure a sales job in this industry is really for them. Sometimes the outcome is terrific when a producer leaves an agency for their true calling and returns for a visit later a much happier person.

Another solution is intensive sales training by a high quality sales consultant, one that demands performance.

The ultimate solution is management that demands success.

I would not like being a competitor of any producer or agency owner that accepts this challenge. When they succeed, they will have a conviction that is nearly impossible to reproduce and that is extremely powerful because it comes from successfully changing one’s ways, from successfully breaking poor habits.

For other readers that can already produce, here is my suggestion: Every agency and producer who cannot produce has five to 10 good accounts. These are low hanging fruit for you.

The only losers are those people that keep insisting that producers do not need to produce.

About Chris Burand

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail: chris@burand-associates.com. More from Chris Burand

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Insurance Journal West September 9, 2013
September 9, 2013
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