It’s a funny experience writing articles for insurance publications and speaking at industry functions. After nearly 750 articles and presentations, the only articles or presentations that really ever spark anger (aside from the ones insurance carriers dislike for shining a light on their weaknesses and helping agents negotiate additional compensation) are ones where I point out the obvious: that specific practices involving producers are not only wasteful, but also often dangerous.
For example, every time I write an article or give a speech where I state that it is not smart to pay producers for call-in and walk-in sales, I get angry responses. My point is that in most agencies, the customer service representatives (CSRs) can take care of these same sales just as well or better than a producer and yet the CSRs don’t get paid a commission for their sales. So why spend money on producers? Why create an employment practices exposure? Why encourage producers to sit waiting for someone to call or walk-in to the agency?
The title “producer” obviously has its root in the word produce. According to the Oxford University Press dictionary, produce is a verb, an action. Its definition is to “cause to happen.” Sitting by a phone waiting for it to ring is not causing anything to happen, unless the producer has telepathic powers. Yet, I will likely get at least one angry response to this article for again stating the obvious.
The most interesting point is that the anger emanates from agency owners who pay their producers to sit by the phone waiting for it to ring. Some have accused me of inciting revolts among CSRs because the CSRs now recognize they are getting the short end of the stick. Some have rationalized that the producers should be paid a commission because they’re not paid a salary. That’s just silly thinking.
A capitalist believes a person should be paid for results. A socialist believes a person should be paid according to need. Producers picking up the phone when it rings are not causing results. They’re waiting for results.
Some agency owners know their producers do not really produce but they don’t want anyone else to know it so they give them the agency’s “house” accounts. Then they go to conferences and company meetings where they share with everyone that their producers are now generating $250,000 or $300,000 in commissions. This is a rationalization designed to cover up reality, cover up personal insecurities and cover up bad management.
These people are not generating anything close to $250,000. They may be servicing $250,000, but they are not producing these sales.
Again, to produce is to make something happen. To service is not the same thing. These semantics are critical.
What’s in a Title?
The vast majority of agencies have only one title for their producers, and that is “producer.” A huge percentage of these producers don’t produce. Based on widely available benchmarks, it is clear that a large minority do not produce more than $150,000 in commissions even with years of experience. The flat reality is that if all they can produce is $150,000 after years in an agency, and assuming they produced all the business and none was given and none was the result of walk-in or call-in business (which is likely a stretch), they are not producers.
Recently I was told that $150,000 of self-produced production over 10 years was great and that I was dead wrong for suggesting so little production was inadequate qualification for the producer title. The agency owner (again, not the producer) was quite angry about my position; quite defensive in fact.
The amount of production necessary to truly qualify as a producer is somewhat subjective. Is it $300,000, $500,000, or $1 million? The right answer depends on many factors, including local demographics and agency size. However, local demographics and agency size are only factors to a limited extent.
In tiny towns in the middle of nowhere, even in tiny towns in Alaska, Idaho, the Dakotas, New Mexico, Kansas and other extremely rural locations with absolutely limited possibilities, there are producers who have produced $500,000 to $1 million in commissions. This shows what can be achieved by a person causing results rather than waiting for results. This provides a benchmark of what should be required to qualify as a true producer. Arguing then that $150,000 is great is a moot point.
So the question is no longer what is feasible. The question becomes what are an agency’s producers capable of producing? Even if the bar is significantly lowered, let’s say $400,000 or 20 percent from what is in fact feasible. If an agency’s producers cannot produce $400,000 over 10 years, are they truly producers?
This is only 80 percent of what is feasible, which is barely above a “C” grade.
It is a fact that a large proportion of producers generate no more than $150,000. But let’s be gracious and add 30 percent to get them to $200,000. To produce net new commission growth of $20,000 per year over 10 years is not causing much to happen. At $200,000, the producer is only scoring 40 percent of what is feasible. That is a big, fat “F.”
This does not mean they are bad people or that they are not useful; it only means they are in the wrong role. This is where semantics are critical.
By only having one title, everyone is forced into the same role regardless of whether he or she is qualified for that role. Possibly these producers are great at servicing books. It’s not a new concept but an agency could make these people servicing producers. (Few agencies adopt this long-known and excellent structure because agency owners’ egos and insecurities are often too large.) If a person is good at waiting for the phone to ring and good with people when the phone does ring, then a servicing producer role will likely make them happier because the expectation of making something happen, specifically making a sale occur, will be removed. Additionally, when properly executed, this structure will enrich the agency.
The agency executives reading this who have already surmounted this issue by either segmenting their producers or eliminating all producers who can’t make things happen, are shaking their heads in disbelief as to why I would still be writing this kind of article. I know those agency owners and executives; they are so happy they are past this point. They may be chagrined when they think about how long it took them to realize the opportunity this structure provides, but are now wondering why so many other executives still don’t get it.
By the same token, they’re really happy so many agency owners don’t get this point because they are taking advantage of those behind the curve.
Agency owners who are steaming – if they have continued to read this far – have some issues to consider. This industry can no longer afford to pay producer wages and commissions to those who do not cause sales to occur. Those who are still waiting for the hard market to save them should know that that is not going to be the solution this time because the soft market has been too soft, the softest in recorded history, and it has changed this industry forever. These agencies may survive, but they will not thrive.
The agencies that thrive will consist of owners, managers, producers and staff who are all pulling their weight and are paid no more, and no less, than they deserve. The people will be in jobs that match their skills. The only people with the title producer will be those folks who produce. The resulting efficiency, which will enable these organizations to cut prices or survive lower rates, will generate great results. They will not only grow faster and make greater profits, but will also greatly improve agency morale and teamwork. Plus coming to work will be a whole lot more fun!
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