A few concrete examples of types of producer compensation, value added services, and tying compensation to procedures might make this article worth the time it takes to read. The author is right in stating many producers don’t actually produce; however, he has not offered any solutions. Complaining without offering a viable solution just makes one a part of the problem.
Ah… but he’s waiting for you to hire his consulting services before he provides that. This is less of a newsworthy article and more of an advertising teaser.
I think that the proactive services value added approach is the future of increased producer compensation. Those actual services are for the individual producer or agency to figure out. They can vary tremendously by the resources of the agency/Producer that they have available and getting the producer to put skin in the game is advisable as well. I did’nt see the article as complaining, its just a fact 60% or more of the so called “producers” do not produce anything at all, and should either be fired or have their income reduced significantly. If you want wellfare, call Obama!
One solution would be to outsource. As challenges within the industry grow in the coming months and years, the effective use of outsourcing will help forward-thinking agents optimize their market positions and cement their status as industry leaders. Outsourcing would allow the producers to focus on their client relationships and generate more revenue.
This is a foreshadowing of what many in upper echelon of the insurance world are acutely aware of: a shift from agent comensation through commissions from insurers, to a fee for service based compensation by policyholders.
We have seen this in the commercial world where wholesalers and manufactuers are squeezing the retailer profits and leveraging contracts in favor of the supplier.
As noted in this article, many benefits insurers will be cutting out commissions on small group accounts. I can’t imagine a small group not relying on a broker or agent for advice regarding the complexities of a group benefits program, so the employers will have to pay the broker/agent for their work through a fee-for-service charge.
This will eventually work its way into the P&C side of the business, and the rate filings will reflect this.
Currently, a number of states have passed laws to prohibit service fees associated with insurance sales and service. Agencies cannot survivie if they rely on unsustainably low commission income from the supply side, so the insurers will enevitably start to file their rates without the retail sales cost loadings for agent commissions and leave remuneration schemes to the agents and brokers.
In one sense, this will enhance the reputation of the insurance industry by eliminating the inherent conflict of interest that currently exists in the commission/contingent commission/profit sharing schemes where the broker/agent’s role is to know the risk and to represent the policyholder in their dealings with the insurer and the insurer’s representatives.
Wildplace, I agree with the basis that producer service fees will be added to the premiums on mid and large accounts, I can not see them applied to smaller retail business anytime soon. I also think that the market conditions are a great motivator in determining the level of commissions. For example right now we are in a deep economic recession on mainstreet, not wallstreet. Right now if a carrier is thinking about reducing their commissions, they probably will lose a good deal of agents selling their products. If the market hardens as everyone keeps predicting it will but never does, that will give the carriers the cover they need to make those compensation adjustments. Until then business as usual and actually we have pushing for commission increases with the promise of business. All good points in prior posts. We have to be innovative with our proactive services and get out and produce or earn our money that we make. We are one of the last service industries that reward the individual for their individual work. If I want a raise all I have to do is hit the street and give myself one.
Sarah, as a broker whom has worked over the years on accounts ranging in size from small to national accounts, I must disagree about your sense of small accouint remuneration going forward. At a certain point, these are all labor intensive accounts (if handled professionally) and the ones that require more time should be paying for it. As we all know, certain policyholders demand more time than others. As highly specialized contract attorneys dealing with everything surrounding an insurance contract, we should be remunerated as such. Brokers with more expertise and sophisticated services will be able to command a higher fee, the same way a small business would consult a local attorney. The downside is that some attorneys may find it easy to become insurance brokers and coopt the brokers’ work, but that is nothing new in the insurance world.
I agree with your thought that small accounts are indeed labor intensive for the carriers, but also for the agencies. If a carrier notifies us of their intention to reduce commission. The first thing I do is look to roll this book with another more attractive carrier. Modest changes due to profitability are common, We look at the book as one account and shop this to other carriers. I am not a large broker, but have some tremendous contracts with some very fine “super” whatever “super” means regional carriers, I like the mutuals. If one these carriers get too agressive with rates or reductions in commissions we will shop it to one of their competitors. That is just the way you have to do business. Sometimes you get caught with an unprofitable book and the carrier wants to reduce the commissions and you will have to eat the reduction. If it is profitable I will go out and sell it to another carrier.
Yes, I agree that the free market system works well in these circumstances; however, it is independent of the question here. Profitability of the business that you bring an insurer would have little to do with your compensation were insurers to cut out retail commissions and brokers/agents relied on fee-for-service income from the policyholders. It may impact your reputation with underwriters on the street, but it will not impact your bottom line. In fact, depending on the extent your agency is involved in loss adjustment/settlement, you may receive more revenue on those accounts from compensation for more claims work on an hourly basis. This would also encourage policyholder implementation of loss control measures to prevent those claims expenses.
Here’s the thing…fact is producers aren’t getting “40%” of written premium. They get 40% of paid commission to the agency they work for. If you’re an independent and the only ‘producer’ for your own agency, then yes, you get the % the carrier pays, and thus whatever is left after o/h is paid. If you are a ‘producer’ straight commission w/o a base salary, in this environment, you better be in one of three scenarios: 1) working for the biggest agency in a small town, 2) working in a larger city, or 3) soliciting in multiple states/regions. Plus, income aside, I think it’s nice to work with the same person you bought the insurance from, from an insureds point of view. Call me old fashioned, I don’t care.
Wildplaces, you hit the nail on the head. I just had a meeting with the owners today before I read this article and stated that in my humble opinion that service out of the norm is now part of success. Get your checkbook, or debit card out and give the customer what they deserve. I.E. loss control, W/C in house claims service X-Mod calculations, (estimated before the beauru releases) policy reviews mid term and not at expiration, etc. The hardening of the Ca. W/C market will offset these costs and you will retain or win more than you lose. Producers, and I say that with tongue in cheek can’t sit on their book and expect to retain. If so, I will be there to take it away from them
Raider Fan, I agree with your philosophy and that is the approach I have always taken in the commission income environment; however, that would change if agent/broker remuneration moves over to a fee-for-service basis. In the new order, we would be charging for our time and for our services.
Lets start the process with this thought in mind. If an Agency has “Producers” who don’t produce and primarily handle the day to day client business, the first stop should be in the boss’ office to find out how management has created this situation. Account handlers should be on one compensation plan and Producers on a clearly defined comp plan that pays them for the risks associated with producing (no ticket, no shirt). Make the comp plan too lean you will lose your best, make it too fat and you’ll lose money. There is a happy medium, that’s the real trick.
You hit the nail on the head, it starts with the boss. What I’ve experienced is the agency head expects the ‘producer’ to do everything therefore not allowing them to actually only ‘produce’, because they refuse to spend money on service people. Also, it is more important than ever to hang onto the business you have so as the producer sometimes I am the only one who albe to save a current account…so there you have it.
I think the article is right on the money as we have had those conversations with producers recently. The good ones want additional marketing support to0 actually make more money and understand the agency must make a profit to bring these tools to them. Without great tools, they can go start with a phone book like we did 30 years ago.
Sarah – how do you disclose to your client that you are putting your agency’s financial interests above their own interests in “rolling” the book? Presuming that you placed them with the original carrier in the full and best interest of the Insured (the scope of service, coverage, price, prompt claim handling, underwriting predictability, financial strength, etc), changing carriers solely for the agency’s benefit in compensation is dubious. There is no such thing as “identical coverage” with a different carrier. Since getting my license 23 years ago, I’ve been fascinated with the “represent the carrier/represent the Insured” paradox. I never understood representing self-interest foremost as an option offered within the constructs of the insurance law.
With small business what are we talking about? Business Owners Policies? Commercial Auto? Workers Compensation? All standardized forms and can be easily replaced.
Yes I do have to look out for the financial interest in our agency selling the coverage. The carrier who just cut our commissions by 30% didn’t care that the average profit margin is around 15% for the agencies book after Rent, salaries, Benefits and all other expenses. So if I accepted this from every carrier who wants us to sign up for their customer Service Center and reduce our commissions from 15% to 8% We would be out of business in no time. Plus I would have to reduce support staff and possibly the commission percentage we pay the producers, wouldn’t I? If you say no! then you either can not count or you are an Obama supporter who does not understand basic accounting principals. BTW, in my 31 years of insurance production, I am not aware of any state insurance law that would prevent us from rolling a book of business which does not pay us to service it correctly to another carrier who adequately pays us to handle the account.
Sorry I didnt answer one of your main questions, We would tell the client that we are parting ways with the carrier for various reasons and have another highly rated carrier who can provide the coverage that they currently have for the same or reduced premiums. (if not we will have to shop it around)
I strongly disagree with the opening statement in the article…
“It is a fact that many people with the title “producer” don’t produce. They service and they accept what comes to them, but they do not produce.”
THAT IS NOT A FACT as you state. Building relationships, coaching insureds, working with the underwriters, etc. Producers do much, much, more than servicing and accepting what comes their way. Producing revenue for an agency is a difficult job! It is insulting to see you say that we just sit around and wait to accept what comes our way.
Producer#1, Please change your name to Servicer#2 behind your CSR, She is better at it than you.
If you call and consider yourself a producer then PRODUCE! Be proud and accept your role as a SALESMAN not a Doctor, Lawyer, Engineer. Yes, you are an advisor who happens to make your living SELLING and winning accounts. Those that understand, and embrace it will make alot of money. Those that do not will wind up hiding under their desk when it comes the 1st of the month and you are looking for your commission check from the owner of the agency. That determines whether you are a Producer or Not. Eventually you have to face the facts and that is written on the bottom of your producer statement at the beginning of each month.
The time has come to drop the facade and let the “producers” earn their compenstation in the same manner as the accountant or lawyer. This would force the dead heads out of the industry and the truly professional would restore credibility and respect to the business. They would need to sell their knowledge and expertise and not just walk in with four quotes and point to the lowest. The inherent conflict of interest must be eliminated.
Insurance Fox. I do not believe that “Producers” earn their compensation the same manner as accountants or lawyers. Accountants get paid by their clients to prepare taxes, etc. Lawyers get retentions, paid by their clients. Agents on the other hand get paid by the companies, we are not paid by the clients. So I fail to see how you think that producers are earning their money the same way>???
you are right, producer1–this article is very biased in favor of agency owners(the potential customers of consultants).
the article opens up with that statement that producers are not producing, but are servicing their books. wonder why they have to service?? could it be that the service provided by the salaried support staff is not adequate? those salaries are the biggest expense of an agency, and that sector would be a better place to focus on as far as demanding better productivity, which in turn would free producers up to get out and sell. producers are paid a percentage of what they bring in—that’s right, BRING IN-these accounts would not be in the agency without the influence and efforts of the producers. it is rather amusing to see and hear owners and consultants say that they have to give producers less and less of the money that the producers generate 100% of—PLUS contingency income–not hearing any mention of that, are we?
when is the last time you saw an article that promotes the concept of cutting CSR pay as a means of making those workers more productive?
by the way, who gets the phone calls from clients in need at night or on the weekends? CSR’s or producers? how many producers can take a day off or have a vacation without being constantly available to clients who have urgent issues?
the article opens up with that statement that producers are not producing, but are servicing their books. wonder why they have to service?? could it be that the service provided by the salaried support staff is not adequate? those salaries are the biggest expense of an agency, and that sector would be a better place to focus on as far as demanding better productivity, which in turn would free producers up to get out and sell. producers are paid a percentage of what they bring in—that’s right, BRING IN-these accounts would not be in the agency without the influence and efforts of the producers. it is rather amusing to see and hear owners and consultants say that they have to give producers less and less of the money that the producers generate 100% of—PLUS contingency income–not hearing any mention of that, are we?
when is the last time you saw an article that promotes the concept of cutting CSR pay as a means of making those workers more productive?
by the way, who gets the phone calls from clients in need at night or on the weekends? CSR’s or producers? how many producers can take a day off or have a vacation without being constantly available to clients who have urgent issues?
Who gets the call all depends on how the system and infrastructure is set up AND how the producer then educates the client. It is ultimately delegaton once the support pieces are in place. It does take a team to get it right and unfortunately there are a lot of situations wherein that is lacking. It has to be driven and supported by ownership and exectuiove management. The old rule of thumb should apply, “he/she who does the work gets the pay”. Now you do have to define andapply the value of the various items that make up the “work”.
Freeing up producers by putting more on the service staff is appropriate. The key is freeing up for what? Being in a current postion to do just that I ahve seen multiple scenarios wherein work is removed from the producer to free them up and nothing changes. Months later the pipeline is still dry and ultimately the AE’s, AM’s, CSR’s and so forth are doing more, the producer is doing less and there is no new production……….EVER. Certainly not going to be the case with producers whom are hard wired to sell and maximize their income but absolutely the case with producers whom are likely more comfortable at farming. They may not be lazy as it is possible they have just found something else to service that hadn’t caught their attention before. They gravitate to that they are most comfortable at, selling or servicing. Their is a vast difference and as previous commenters have pointed out we ahve a lot of very smart, talented folks who service well and they will never make close to what a great SALES person makes. That is the way it is!
Producers are supposed to providing valuable knowledge and expertise to assit clients in minimizing risk. That means more than just being a “insurance man”. The issue is the manner in which they are compensated, which is supposed be on behalf of the carrier from whom commission is paid. Alas, that is not the case because most agents behave as BROKERS, meaning they actually reprsent the client. The client has no vested interest in professionalism if nothing is paid for service. If the client had to pay, the “insurance professional” would have to perform to truly protect the client.
I go to my lawyer and accountant for specialized knowledge. Why should the insurance process be any different.
Gotcha. I see your point. I agree that the value we provide is to the insured’s, and I would indeed prefer it if they paid my paycheck. Question: If we went to that method of compensation, that would force insured’s to both pay for the policy, and pay for the middle-man. Do you think the marketplace would support the double bill? Currently, with the commission method, the insured only pays one bill, then the carrier pays the agent. If the insured was forced to pay the agent seperatly, that would really change the game. Don’t get me wrong, I like it, but would the marketplace support it? I would think that many carriers would be forced into direct writting because I bet there are insured’s out there that would want to stay a customer, but not pay the agent seperatly.
I agree, but you do realize this will have the inevitable effect of commoditizing carriers and their products/services? It will additionally move the management of accounts down to the producers and agencies, not the carriers.
A few not so subtle points that carriers will very well resist, as their interests lie in maintaining their perceived competitive advantages and customer loyalty, something that will be lost in the scenario you describe.
If small agencies follow your advice, the only group to benefit will be the Alliances and Clusters! Agencies must offer value to retain their producers. Producers must be differentiated and motivated to drive business into the agency. The agency must manage that book with Qualified and Motivated Account Managers that are pro-active so that the Producer can go out an produce…
Pretty basic. Not complicated. This is a simple business made complicated by egos and misapplied strategies. You’re right, though, it’s not about percentages. It’s about productivity and efficiency.
Blah, Blah, Blah! Just stop it with the complaining and get out and produce something. Make something of yourself and stop calling yourself an advisor. Advisor’s get paid very little in our business, Salespeople are one of the highest paid profession in our country. Be proud of what you do, but only if you do it! Leave your desk and sell something. This has nothing to do with Owners vs Producers. Trust me an Owner would love to write you a check for a million dollars for your production. So get out there and earn it!
Sarah,
(in the tone of sarcasm) It’s a mystery how you’ve survived a male dominated industry, you’re so soft and warm!
Don’t let these guys ruffle your feathers so easily. It sounds like you’re doing great for everyone in your agency. Keep snapping that whip and kicking ass and taking names.
Getting out, sounds like to me you are getting out! That is the key to success as a producer. I produce as well. It’s all about winning the account, forget that (I can’t do it!, I don’t have the time, crap) let the service staff do the reactive service needs, ie certs, binders add/ del vehicles etc. Producers need to be proactive with their services, ie wc,mod audits, contract reviews, payroll/ sales updates, safety plans, etc. Things that require a follow up proactive call to the client. Put together a yearly service timeline w/client follow through and ask for referrals of your top prospects. It is a process, not a call and close business, or I will wait here by the phone, or I am looking for my boss to spend money, that will make sales for me approach that all the idiots above are doing. To me there is nothing less attractive in a person than someone who blames everyone and thing except themselves for their failure. If your not making sales look in the mirror and get mad at yourself, get out there and do the hard work it takes to be a top flight salesman. If not no one will believe your bullish*t that your working hard, your producer statement is the only proof anyone needs. Sorry to be blunt, but that’s the real world. Get out there! Getting out there, you got the right handle!
When you look at it from a client’s perspective and really consider the impact ot commissions vs fees, fees should win every time. Commission basis equates to “the more insurance you sell, the more you make”. Fee should mean that there is a quid pro quo for what you are delivering. As a business owner why would I not want to pay for services rendered (whatever that may be), rather than a typically hidden commission that is almost certainly not tied to my total cost of risk and my business’s bottom line? In a sense the insurance provider is paid more for “selling” high priced insurance than providing value added services that reduce the long term total cost of risk which is inclusive of insurance premiums, retained risks, deductibles, retentions and so forth.
As to Chris’s article, I think it is right on the money in that it should open the mind to a problem and get you thinking about alternatives, not necessary to provide them as there is a lot of inforamtion on the options if you take the time to investigate. The biggest challenge is the closed mind and the fear of change.
What the he’ll are you talking about? What a bunch of pouge! The business is what it is! The article was definitely right about one thing there are a lot of producers out there, that do not, or can not, due to their attitudes produce at all! It’s not rocket science, GET OUT AND CALL ON AS MANY PROSPECTS, ASK EVERY CLIENT FOR REFERRALS!
The usual greedy no nothing that its in my office asking for my insurance business based on the fact that they are agressive and can give me a quote. I wouldn’t talk to one of these bores if you paid me.
Have any intersting risk management ideas? Sell those and an I might listen to you. Pull your behind out of 1955.
Sarah, looks like to me you understand what it takes to sell business. There are a great deal of people who do not read their job title when hired. They think that being a producer is all about sitting behind a desk, waiting for their phone to ring or looking for the receptionist to forward a call from a prospect calling into the office. LMAO… These people do not understand what it takes to be successful and never will, You can talk to them until your blue in the face. They will not even change their poor sales behavior and habits even when confronted with losing their jobs. They have a built in fear of rejection so overwelming they will can not do what their job requires. PRODUCE!
A few concrete examples of types of producer compensation, value added services, and tying compensation to procedures might make this article worth the time it takes to read. The author is right in stating many producers don’t actually produce; however, he has not offered any solutions. Complaining without offering a viable solution just makes one a part of the problem.
Ah… but he’s waiting for you to hire his consulting services before he provides that. This is less of a newsworthy article and more of an advertising teaser.
I think that the proactive services value added approach is the future of increased producer compensation. Those actual services are for the individual producer or agency to figure out. They can vary tremendously by the resources of the agency/Producer that they have available and getting the producer to put skin in the game is advisable as well. I did’nt see the article as complaining, its just a fact 60% or more of the so called “producers” do not produce anything at all, and should either be fired or have their income reduced significantly. If you want wellfare, call Obama!
One solution would be to outsource. As challenges within the industry grow in the coming months and years, the effective use of outsourcing will help forward-thinking agents optimize their market positions and cement their status as industry leaders. Outsourcing would allow the producers to focus on their client relationships and generate more revenue.
This is a foreshadowing of what many in upper echelon of the insurance world are acutely aware of: a shift from agent comensation through commissions from insurers, to a fee for service based compensation by policyholders.
We have seen this in the commercial world where wholesalers and manufactuers are squeezing the retailer profits and leveraging contracts in favor of the supplier.
As noted in this article, many benefits insurers will be cutting out commissions on small group accounts. I can’t imagine a small group not relying on a broker or agent for advice regarding the complexities of a group benefits program, so the employers will have to pay the broker/agent for their work through a fee-for-service charge.
This will eventually work its way into the P&C side of the business, and the rate filings will reflect this.
Currently, a number of states have passed laws to prohibit service fees associated with insurance sales and service. Agencies cannot survivie if they rely on unsustainably low commission income from the supply side, so the insurers will enevitably start to file their rates without the retail sales cost loadings for agent commissions and leave remuneration schemes to the agents and brokers.
In one sense, this will enhance the reputation of the insurance industry by eliminating the inherent conflict of interest that currently exists in the commission/contingent commission/profit sharing schemes where the broker/agent’s role is to know the risk and to represent the policyholder in their dealings with the insurer and the insurer’s representatives.
Yet another ludicrous, pontificating and misleading piece of nonsense from Burand. Hardly worth the reading.
While I agree that it’s an op-ed piece, and lacking in some hard examples/evidence, you’re comment doesn’t help me understand your position either.
What specifically are your issues with the article?
Mike, you obviously are one of those producers that do not produce. LOL…
I think Mike is talking to his boss, hoping that the “keep moving, nothing to see here” thing works. LOL….
Wildplace, I agree with the basis that producer service fees will be added to the premiums on mid and large accounts, I can not see them applied to smaller retail business anytime soon. I also think that the market conditions are a great motivator in determining the level of commissions. For example right now we are in a deep economic recession on mainstreet, not wallstreet. Right now if a carrier is thinking about reducing their commissions, they probably will lose a good deal of agents selling their products. If the market hardens as everyone keeps predicting it will but never does, that will give the carriers the cover they need to make those compensation adjustments. Until then business as usual and actually we have pushing for commission increases with the promise of business. All good points in prior posts. We have to be innovative with our proactive services and get out and produce or earn our money that we make. We are one of the last service industries that reward the individual for their individual work. If I want a raise all I have to do is hit the street and give myself one.
Sarah, as a broker whom has worked over the years on accounts ranging in size from small to national accounts, I must disagree about your sense of small accouint remuneration going forward. At a certain point, these are all labor intensive accounts (if handled professionally) and the ones that require more time should be paying for it. As we all know, certain policyholders demand more time than others. As highly specialized contract attorneys dealing with everything surrounding an insurance contract, we should be remunerated as such. Brokers with more expertise and sophisticated services will be able to command a higher fee, the same way a small business would consult a local attorney. The downside is that some attorneys may find it easy to become insurance brokers and coopt the brokers’ work, but that is nothing new in the insurance world.
I agree with all your other observations…
Wildplaces,
I agree with your thought that small accounts are indeed labor intensive for the carriers, but also for the agencies. If a carrier notifies us of their intention to reduce commission. The first thing I do is look to roll this book with another more attractive carrier. Modest changes due to profitability are common, We look at the book as one account and shop this to other carriers. I am not a large broker, but have some tremendous contracts with some very fine “super” whatever “super” means regional carriers, I like the mutuals. If one these carriers get too agressive with rates or reductions in commissions we will shop it to one of their competitors. That is just the way you have to do business. Sometimes you get caught with an unprofitable book and the carrier wants to reduce the commissions and you will have to eat the reduction. If it is profitable I will go out and sell it to another carrier.
Yes, I agree that the free market system works well in these circumstances; however, it is independent of the question here. Profitability of the business that you bring an insurer would have little to do with your compensation were insurers to cut out retail commissions and brokers/agents relied on fee-for-service income from the policyholders. It may impact your reputation with underwriters on the street, but it will not impact your bottom line. In fact, depending on the extent your agency is involved in loss adjustment/settlement, you may receive more revenue on those accounts from compensation for more claims work on an hourly basis. This would also encourage policyholder implementation of loss control measures to prevent those claims expenses.
Here’s the thing…fact is producers aren’t getting “40%” of written premium. They get 40% of paid commission to the agency they work for. If you’re an independent and the only ‘producer’ for your own agency, then yes, you get the % the carrier pays, and thus whatever is left after o/h is paid. If you are a ‘producer’ straight commission w/o a base salary, in this environment, you better be in one of three scenarios: 1) working for the biggest agency in a small town, 2) working in a larger city, or 3) soliciting in multiple states/regions. Plus, income aside, I think it’s nice to work with the same person you bought the insurance from, from an insureds point of view. Call me old fashioned, I don’t care.
Wildplaces, you hit the nail on the head. I just had a meeting with the owners today before I read this article and stated that in my humble opinion that service out of the norm is now part of success. Get your checkbook, or debit card out and give the customer what they deserve. I.E. loss control, W/C in house claims service X-Mod calculations, (estimated before the beauru releases) policy reviews mid term and not at expiration, etc. The hardening of the Ca. W/C market will offset these costs and you will retain or win more than you lose. Producers, and I say that with tongue in cheek can’t sit on their book and expect to retain. If so, I will be there to take it away from them
Raider Fan, I agree with your philosophy and that is the approach I have always taken in the commission income environment; however, that would change if agent/broker remuneration moves over to a fee-for-service basis. In the new order, we would be charging for our time and for our services.
Lets start the process with this thought in mind. If an Agency has “Producers” who don’t produce and primarily handle the day to day client business, the first stop should be in the boss’ office to find out how management has created this situation. Account handlers should be on one compensation plan and Producers on a clearly defined comp plan that pays them for the risks associated with producing (no ticket, no shirt). Make the comp plan too lean you will lose your best, make it too fat and you’ll lose money. There is a happy medium, that’s the real trick.
You hit the nail on the head, it starts with the boss. What I’ve experienced is the agency head expects the ‘producer’ to do everything therefore not allowing them to actually only ‘produce’, because they refuse to spend money on service people. Also, it is more important than ever to hang onto the business you have so as the producer sometimes I am the only one who albe to save a current account…so there you have it.
I think the article is right on the money as we have had those conversations with producers recently. The good ones want additional marketing support to0 actually make more money and understand the agency must make a profit to bring these tools to them. Without great tools, they can go start with a phone book like we did 30 years ago.
Sarah – how do you disclose to your client that you are putting your agency’s financial interests above their own interests in “rolling” the book? Presuming that you placed them with the original carrier in the full and best interest of the Insured (the scope of service, coverage, price, prompt claim handling, underwriting predictability, financial strength, etc), changing carriers solely for the agency’s benefit in compensation is dubious. There is no such thing as “identical coverage” with a different carrier. Since getting my license 23 years ago, I’ve been fascinated with the “represent the carrier/represent the Insured” paradox. I never understood representing self-interest foremost as an option offered within the constructs of the insurance law.
With small business what are we talking about? Business Owners Policies? Commercial Auto? Workers Compensation? All standardized forms and can be easily replaced.
Yes I do have to look out for the financial interest in our agency selling the coverage. The carrier who just cut our commissions by 30% didn’t care that the average profit margin is around 15% for the agencies book after Rent, salaries, Benefits and all other expenses. So if I accepted this from every carrier who wants us to sign up for their customer Service Center and reduce our commissions from 15% to 8% We would be out of business in no time. Plus I would have to reduce support staff and possibly the commission percentage we pay the producers, wouldn’t I? If you say no! then you either can not count or you are an Obama supporter who does not understand basic accounting principals. BTW, in my 31 years of insurance production, I am not aware of any state insurance law that would prevent us from rolling a book of business which does not pay us to service it correctly to another carrier who adequately pays us to handle the account.
Sorry I didnt answer one of your main questions, We would tell the client that we are parting ways with the carrier for various reasons and have another highly rated carrier who can provide the coverage that they currently have for the same or reduced premiums. (if not we will have to shop it around)
I strongly disagree with the opening statement in the article…
“It is a fact that many people with the title “producer” don’t produce. They service and they accept what comes to them, but they do not produce.”
THAT IS NOT A FACT as you state. Building relationships, coaching insureds, working with the underwriters, etc. Producers do much, much, more than servicing and accepting what comes their way. Producing revenue for an agency is a difficult job! It is insulting to see you say that we just sit around and wait to accept what comes our way.
Producer#1, Please change your name to Servicer#2 behind your CSR, She is better at it than you.
If you call and consider yourself a producer then PRODUCE! Be proud and accept your role as a SALESMAN not a Doctor, Lawyer, Engineer. Yes, you are an advisor who happens to make your living SELLING and winning accounts. Those that understand, and embrace it will make alot of money. Those that do not will wind up hiding under their desk when it comes the 1st of the month and you are looking for your commission check from the owner of the agency. That determines whether you are a Producer or Not. Eventually you have to face the facts and that is written on the bottom of your producer statement at the beginning of each month.
The time has come to drop the facade and let the “producers” earn their compenstation in the same manner as the accountant or lawyer. This would force the dead heads out of the industry and the truly professional would restore credibility and respect to the business. They would need to sell their knowledge and expertise and not just walk in with four quotes and point to the lowest. The inherent conflict of interest must be eliminated.
Insurance Fox. I do not believe that “Producers” earn their compensation the same manner as accountants or lawyers. Accountants get paid by their clients to prepare taxes, etc. Lawyers get retentions, paid by their clients. Agents on the other hand get paid by the companies, we are not paid by the clients. So I fail to see how you think that producers are earning their money the same way>???
you are right, producer1–this article is very biased in favor of agency owners(the potential customers of consultants).
the article opens up with that statement that producers are not producing, but are servicing their books. wonder why they have to service?? could it be that the service provided by the salaried support staff is not adequate? those salaries are the biggest expense of an agency, and that sector would be a better place to focus on as far as demanding better productivity, which in turn would free producers up to get out and sell. producers are paid a percentage of what they bring in—that’s right, BRING IN-these accounts would not be in the agency without the influence and efforts of the producers. it is rather amusing to see and hear owners and consultants say that they have to give producers less and less of the money that the producers generate 100% of—PLUS contingency income–not hearing any mention of that, are we?
when is the last time you saw an article that promotes the concept of cutting CSR pay as a means of making those workers more productive?
by the way, who gets the phone calls from clients in need at night or on the weekends? CSR’s or producers? how many producers can take a day off or have a vacation without being constantly available to clients who have urgent issues?
a little respect, please!
the article opens up with that statement that producers are not producing, but are servicing their books. wonder why they have to service?? could it be that the service provided by the salaried support staff is not adequate? those salaries are the biggest expense of an agency, and that sector would be a better place to focus on as far as demanding better productivity, which in turn would free producers up to get out and sell. producers are paid a percentage of what they bring in—that’s right, BRING IN-these accounts would not be in the agency without the influence and efforts of the producers. it is rather amusing to see and hear owners and consultants say that they have to give producers less and less of the money that the producers generate 100% of—PLUS contingency income–not hearing any mention of that, are we?
when is the last time you saw an article that promotes the concept of cutting CSR pay as a means of making those workers more productive?
by the way, who gets the phone calls from clients in need at night or on the weekends? CSR’s or producers? how many producers can take a day off or have a vacation without being constantly available to clients who have urgent issues?
a little respect, please!
If you are a producer, you get paid a commission. If you are a CSR you get a salary. Understand?
Pull up your panties and go sell something! Your wife might actually think something of you. You will get respect when you do your job!
Who gets the call all depends on how the system and infrastructure is set up AND how the producer then educates the client. It is ultimately delegaton once the support pieces are in place. It does take a team to get it right and unfortunately there are a lot of situations wherein that is lacking. It has to be driven and supported by ownership and exectuiove management. The old rule of thumb should apply, “he/she who does the work gets the pay”. Now you do have to define andapply the value of the various items that make up the “work”.
Freeing up producers by putting more on the service staff is appropriate. The key is freeing up for what? Being in a current postion to do just that I ahve seen multiple scenarios wherein work is removed from the producer to free them up and nothing changes. Months later the pipeline is still dry and ultimately the AE’s, AM’s, CSR’s and so forth are doing more, the producer is doing less and there is no new production……….EVER. Certainly not going to be the case with producers whom are hard wired to sell and maximize their income but absolutely the case with producers whom are likely more comfortable at farming. They may not be lazy as it is possible they have just found something else to service that hadn’t caught their attention before. They gravitate to that they are most comfortable at, selling or servicing. Their is a vast difference and as previous commenters have pointed out we ahve a lot of very smart, talented folks who service well and they will never make close to what a great SALES person makes. That is the way it is!
Producers are supposed to providing valuable knowledge and expertise to assit clients in minimizing risk. That means more than just being a “insurance man”. The issue is the manner in which they are compensated, which is supposed be on behalf of the carrier from whom commission is paid. Alas, that is not the case because most agents behave as BROKERS, meaning they actually reprsent the client. The client has no vested interest in professionalism if nothing is paid for service. If the client had to pay, the “insurance professional” would have to perform to truly protect the client.
I go to my lawyer and accountant for specialized knowledge. Why should the insurance process be any different.
Gotcha. I see your point. I agree that the value we provide is to the insured’s, and I would indeed prefer it if they paid my paycheck. Question: If we went to that method of compensation, that would force insured’s to both pay for the policy, and pay for the middle-man. Do you think the marketplace would support the double bill? Currently, with the commission method, the insured only pays one bill, then the carrier pays the agent. If the insured was forced to pay the agent seperatly, that would really change the game. Don’t get me wrong, I like it, but would the marketplace support it? I would think that many carriers would be forced into direct writting because I bet there are insured’s out there that would want to stay a customer, but not pay the agent seperatly.
I agree, but you do realize this will have the inevitable effect of commoditizing carriers and their products/services? It will additionally move the management of accounts down to the producers and agencies, not the carriers.
A few not so subtle points that carriers will very well resist, as their interests lie in maintaining their perceived competitive advantages and customer loyalty, something that will be lost in the scenario you describe.
Personally, I’m all for it…
If small agencies follow your advice, the only group to benefit will be the Alliances and Clusters! Agencies must offer value to retain their producers. Producers must be differentiated and motivated to drive business into the agency. The agency must manage that book with Qualified and Motivated Account Managers that are pro-active so that the Producer can go out an produce…
Pretty basic. Not complicated. This is a simple business made complicated by egos and misapplied strategies. You’re right, though, it’s not about percentages. It’s about productivity and efficiency.
Blah, Blah, Blah! Just stop it with the complaining and get out and produce something. Make something of yourself and stop calling yourself an advisor. Advisor’s get paid very little in our business, Salespeople are one of the highest paid profession in our country. Be proud of what you do, but only if you do it! Leave your desk and sell something. This has nothing to do with Owners vs Producers. Trust me an Owner would love to write you a check for a million dollars for your production. So get out there and earn it!
Sarah,
(in the tone of sarcasm) It’s a mystery how you’ve survived a male dominated industry, you’re so soft and warm!
Don’t let these guys ruffle your feathers so easily. It sounds like you’re doing great for everyone in your agency. Keep snapping that whip and kicking ass and taking names.
Getting out, sounds like to me you are getting out! That is the key to success as a producer. I produce as well. It’s all about winning the account, forget that (I can’t do it!, I don’t have the time, crap) let the service staff do the reactive service needs, ie certs, binders add/ del vehicles etc. Producers need to be proactive with their services, ie wc,mod audits, contract reviews, payroll/ sales updates, safety plans, etc. Things that require a follow up proactive call to the client. Put together a yearly service timeline w/client follow through and ask for referrals of your top prospects. It is a process, not a call and close business, or I will wait here by the phone, or I am looking for my boss to spend money, that will make sales for me approach that all the idiots above are doing. To me there is nothing less attractive in a person than someone who blames everyone and thing except themselves for their failure. If your not making sales look in the mirror and get mad at yourself, get out there and do the hard work it takes to be a top flight salesman. If not no one will believe your bullish*t that your working hard, your producer statement is the only proof anyone needs. Sorry to be blunt, but that’s the real world. Get out there! Getting out there, you got the right handle!
Sarah will you marry me
This is why you never hear kids say, “when I grow up, I want to be an insurance agent!”
When you look at it from a client’s perspective and really consider the impact ot commissions vs fees, fees should win every time. Commission basis equates to “the more insurance you sell, the more you make”. Fee should mean that there is a quid pro quo for what you are delivering. As a business owner why would I not want to pay for services rendered (whatever that may be), rather than a typically hidden commission that is almost certainly not tied to my total cost of risk and my business’s bottom line? In a sense the insurance provider is paid more for “selling” high priced insurance than providing value added services that reduce the long term total cost of risk which is inclusive of insurance premiums, retained risks, deductibles, retentions and so forth.
As to Chris’s article, I think it is right on the money in that it should open the mind to a problem and get you thinking about alternatives, not necessary to provide them as there is a lot of inforamtion on the options if you take the time to investigate. The biggest challenge is the closed mind and the fear of change.
What the he’ll are you talking about? What a bunch of pouge! The business is what it is! The article was definitely right about one thing there are a lot of producers out there, that do not, or can not, due to their attitudes produce at all! It’s not rocket science, GET OUT AND CALL ON AS MANY PROSPECTS, ASK EVERY CLIENT FOR REFERRALS!
The usual greedy no nothing that its in my office asking for my insurance business based on the fact that they are agressive and can give me a quote. I wouldn’t talk to one of these bores if you paid me.
Have any intersting risk management ideas? Sell those and an I might listen to you. Pull your behind out of 1955.
Sarah, looks like to me you understand what it takes to sell business. There are a great deal of people who do not read their job title when hired. They think that being a producer is all about sitting behind a desk, waiting for their phone to ring or looking for the receptionist to forward a call from a prospect calling into the office. LMAO… These people do not understand what it takes to be successful and never will, You can talk to them until your blue in the face. They will not even change their poor sales behavior and habits even when confronted with losing their jobs. They have a built in fear of rejection so overwelming they will can not do what their job requires. PRODUCE!