The prevailing thought is that most personal lines producers are little more than quoters and order-takers. However, I have personally employed Personal Lines Producers who were skilled Relationship Managers, who made friends with the people that requested insurance assistance, who strive to protect ALL of the clients’ assets and who were not at all shy of asking for referrals and generating a geometrically growing client base for them and for our agency.

Order Takers

If the “producer” is, in fact, an order-taker who answers the phone or personally visit, quotes the insurance policy and has no further relationship involvement with the client, they should be paid a modest salary and a commission on each new sale. They will, for their entire careers, run the hamster wheel because they do nothing to increase the value of the client to the agency beyond the quoting process. Neither do they have any function that causes the client to stay with the agency. We all know that a short-term client is EXTREMELY expensive for any agency. The quote and issue process, in itself is expensive and time consuming and you need to keep a policy for two or three years to gain a profit advantage on that piece of business.

However, a Relationship Manager (RM) who happens to deal in Personal Lines as his/her primary line of business is as valuable as any Commercial Line Relationship Manager IF their efforts a) envelope all of the client’s insurance needs in favor of the agency, b) build a friendship and trust relationship that causes the client to want to stay with the agency, and c) evolves additional clients from each customer that (s)he builds for the agency.

In the Asset Protection Model, the RM usually has a single product line strength (PL, CL, Life, Health). However, (s)he knows that the key to any long term relationship is in protecting ALL of the clients asset protection needs. To that end, the RM uses every human asset possessed by the agency to serve the client. The RM is the coordinator for the agency with the client. (S)he identifies every asset that needs protection, either analyzes that asset personally (if that product is one of their strengths) or finds the most qualified agency employee to participate in the client asset analysis toward assuring the client that he is properly protected in that area.

So if the “producer” is really a Relationship Manager, we must pay them like any other relationship manager, based on the book of business that they help build and control for the agency and the continuing growth of that book of business.

We devise many producer compensation programs for Commercial Lines and Financial Services – many less in Personal Lines because the “producers,” whether successful or not, appear to be more order-takers (friendly and professional, perhaps, but order-takers, nonetheless) than relationship builders and managers. The difference between an order-taker and a true Relationship Manager in Personal Lines is their ability to do two things, cross-sell all lines for the clients into the agency and achieve a continuous flow of referrals to multiply the business generated from each client. The strength that permits a producer or Relationship Manager to accomplish these tasks is the ability to go beyond price quoting to become friends with and build a relationship with the agency’s customers.

A personal lines employee who simply takes orders, provides quotes and issues coverage for new clients occupies an administrative function, not a sales function and should be salaried similar to a customer service representative. There is certainly a role for a dedicated New Business Representative (NBR) within any active agency since the functions involved may be construed as interfering with the normal process-heavy details of a service role. The NBR is dedicated to responding to sales inquiries from existing clients, new prospects to the agency and any affinity group members seeking quotes. The greatest differentiator between the New Business Representative and the Producer (Relationship Manager) is the amount of compensation NBR’s, like CSR’s, will earn 10% – 15% of the books of business that they service while Producers/ RM’s earn more. The guarantees of compensation NBR’s are under guaranteed salaries that respond to Incentive Compensation or other form of productivity-based performance raise features (see our articles on Incentive Compensation) while Producer’s get up-side potential for growth and should take down-side risks in trailing years’ compensation if the book of business declines.

If the agency retains the services of Personal Lines producers, the measure of those producers’ success is in their account-rounding and referral generation capabilities and the value of those producers at the agency should be calculated in accordance with the total volume of commissions that (s)he causes to be generated for the agency. The value of a personal lines producer will be derived from a) the issuance of sufficient new business to grow the agency annually and b) from the derivation of additional growth (and retention) of an existing book of business through the producer’s cross-selling and referral generation efforts.

Regardless of whether a producer is paid a salary and growth bonus (our preference), a draw, or a straight commission, his/her value to the agency is defined by the total retained book of business that has been generated through his/her efforts over the lifetime of that producer within the agency. While the compensation for commercial producers have averaged 30%-33% for arising producers, 38% for second level producers and up to 42%-45% for high impact producers (high volume, high profitability – discussed further, below), the compensation for personal lines producers must, by virtue of the lower average income per policy and client and the extraordinary support work effort and agency costs in those lines of business, be less.

Personal Lines producers can be defined into two categories, Arising Producers and Master Producers. The difference is that Arising Producers are new and require an investment by the agency until the producer generates sufficient income for the agency to offset the investment. Master Producers are generating sufficient growth and retention to pay for themself, including for the service, administration and profits required from their contributions to the agency’s book of business.


‘Arising Producers’ should be paid a salary with target production that would generate enough total revenue within four years to justify their salaries at a rate that would pay for the agency’s overhead, investment and generate a profit margin from their efforts. NO AGENCY SHOULD BE IN BUSINESS TO BREAK-EVEN OR LOSE MONEY ON ANY LINE OF BUSINESS. While that figure changes agency-by-agency and can range from 15% to 25%, a rate of 20% of revenue for the agency is the average that we have found through our studies. Please note, we use averages for familiarization reasons, but just as no agency ‘strives to be average’, we caution against using dead averages instead of analyzing the required percentage of revenue in your own agency needed to achieve parity and profit. This means that an Arising Agent is covering his total cost to the agency if his compensation is between 15% and 25% of the total retained revenues that (s)he has generated to date. That normally takes four to five years and includes the pay-back of the investment in the Arising Producer’s compensation until (s)he achieves parity. During the time a Producer is an Arising Producer, (s)he is learning how to establish relationships with new and existing agency clients in order to earn the trust and become the client’s agent for all of the client’s insurance needs. The Producer is also learning how to ask for referrals from happy agency clients and how to penetrate those referrals for a much better source of new business than call-ins.

The skills of building relationships, cross-selling and referral solicitation are the keys to the success of any Personal Lines Producer. Once learned, the Producer’s efforts will cause the agency book of business to grow much faster and more dramatically than simply waiting for quote calls. Once mastered, the Producer will quickly convert to Master Producer status, allowing both the Producer and the agency to earn more money on the producer’s efforts.

The amount of a new Arising Producer’s salary should be determined by his/her “need” (the amount the producer needs to pay his/her bills), not by the producer’s historical earnings. The reason the producer should be as interested as the agency in minimizing salary to the producer’s expense load is because the salary determines the required production during his first several years. Minimizing base cost to the agency also minimizes MSL (Minimum Success Levels) required of the producer to retain the position and to eventually achieve Master Producer status (with greater up-side compensation potential). And the base compensation does not limit the producer’s earnings capacity in any way since growth beyond goal is paid at the prevailing base commission level for producers in the agency. It is a ‘no lose’ scenario since the producer has no limit to his/her earnings, it is easier to qualify more quickly as a Master Producer, and the agency is not paying the Arising Producer in excess of his/her needs (using agency funds before they are earned by the producer) until the producer earns that level of compensation.

A producer who desires a high income to start because of historical earnings falls into a trap that could consume the Producer. If a Producer has served another firm and has built a book of business that sponsors that producer, that book of business is typically not transferrable. Although you must pay the Producer an amount sufficient to accommodate his expenses as the Producer build the agency’s book of business to sponsor the producer’s presence, paying in excess of that amount before the Producer has earned that compensation level will make it much more difficult for the Producer to validate and convert to Master Producer status. As many agents have found, eventually both of the owner and Producer will realize that the producer cannot validate the higher salary for a longer time than the agency can sustain the investment.

As an example, a PL Arising Producer earning $35,000/yr. salary would become fully productive when his/her efforts generated $175,000 of annualized agency commission from a combination of new sales and retained renewals in the book of business generated through that producer’s efforts if 20% is the correct factor for profitability of the producer’s book within your agency. For most agencies this requires the generation of almost $1.5 Million of premiums. If this is reasonable for your geographic area in a five year period, a $35,000 compensation level is not out of range. If you live in a small, rural community where $1.5 Million may be a large part of the available personal lines market, you will not be able to earn a profit from a producer earning $35,000 for sales efforts and will likely lose that producer when you realize that you are losing money on the bargain every year.

A producer may not remain in the ‘arising producer’ category for more than four years. If (s)he has not achieved enough production to warrant his compensation at base compensation percentage of the book (and the producer is to be retained), the salary must be reduced to the base compensation for the book in the fifth year and the producer moves to the Base/Growth model or must alter his/her position from producer to NBR or CSR to remain within the agency.


If the Producer begins as an Arising Producer, when the book of business generated by the Producer achieves the level that balances the agency investment, that producer is converted to the Base/Growth Model that gives the producer a) much greater upside potential, b) compensation-sensitive Add-On and Referral goals (goals and results for Add-Ons and Referrals are created and tracked in the Arising stage, but do not affect compensation), and c) a downside potential if the book of business diminishes. The Producer becomes a Master Producer. More experienced Producers existing in the agency or coming into the agency with a book of business that will support them in the Program may qualify as a Master Producer from the outset.

A Master Producer earns a higher percentage of every dollar generated in the book of business for which the producer was responsible. The reason the agency can afford a higher percentage in a base/growth model is because the Master Producer is accomplished in the cross-selling and referral generation that sets those producers apart from Arising Producers and from ‘order takers’.

The generation of AddOns (cross selling existing clients) and Referrals by an Arising Producer is encouraged and are rewarded with bonuses — but are not required by the position. As a Master Producer, AddOns and Referrals become an integral part of the Producer’s goals to earn a progressive salary and bonuses each year.

These are new features for many agents who have wondered how to fairly pay producers of Personal Lines. But a producer must acknowledge that (s)he is with the agency to help GROW the book of business, not as a service representative or maintenance agent. That means if the producer wishes the up-side potential of compensation growth commensurate with the book growth, he needs to accept the potential of the reverse if the book declines. Cross-Selling (add-on lines for existing clients) and seeking referrals is the only way we separate ourselves from our competitor friends at the direct writers and at more traditional insurance agencies. Without the relationship-building and management efforts that result in Add-On sales and referrals to friends of our clients, we are just ‘price-quoters’.

A potential benefit to an agency is that if any producers leave the agency, the portion of the commission left behind that would have been accrued to them for production becomes the ‘seed money’ to support new producers as they build their production toward the level required to move them into the pure Base/Growth Model. Those producers are granted the books of business for which the departed producers were responsible for cross selling opportunities and for the attainment of referrals (that would less likely occur with a New Business Representative instead of a producer) through relationship building efforts. The Arising Producers do NOT get credit for the departed producers’ books of business for compensation purposes. However, any Add-On business or referral business DOES accrue to the Arising Producer’s book of business.

Once the producer has ‘qualified’ as a Master Producer, the producer is moved into the Base/Growth model for compensation. In that model, the total book of business (new and retained renewals) in the previous year becomes the basis of salary in the next (at the agency’s base compensation percentage). Since the employee is a producer, not a service representative, they control their own destiny and take a downside, as well as upside risk each year, basing their next year’s salary on the fixed percentage of the book of business (for which they have been responsible) that permits the agency to earn a profit on the personal lines book of business.

The Base Compensation is determined by the expense factors and competitive requirements for employees in the area in which the agency is located. Sometimes (in some metropolitan areas) the model must be adjusted to a higher level due to economic and competitive pressures on strong performing employees, but the average premiums and commissions are also higher. The Base Compensation works well to the point at which the book of business created by the producer is economically more profitable than the books of business of arising producers and additional compensation is justified in terms of larger bonus commission for growth. There are usually two or more break-points in every active agency at which books of business gain substantial growth in profitability. At each break-point producers who have generated and retained that level of agency commission will generate agency profits large enough to bonus a higher amount for annual growth.

Once the agency profitability on growth has achieved the tipping point (to the next level of profitability) a compensation increase of 5% ON ANNUAL GROWTH as a bonus will add an incentive to the producer’s efforts. The reason the agency is justified paying the higher percentage on growth is because the entire book of business becomes substantially more profitable to the agency for larger volume producers (fixed costs remain stable and more revenues are attained).

Some agencies have chosen to further break the Compensation Tiers into smaller increments (compensation steps) to speed the incentives the producers to both continue to grow new business and to take a genuine interest in the retention of business (without which the agency’s profitability decreases substantially). We do NOT recommend steps smaller than $100,000 increments of growth.

Another feature of our PL Producer Compensation Program is that the base compensation percentage for the Producer actually declines by one percent in any year that the total book of business for which the producer is responsible DECLINES from the prior year. Agencies have suffered declines both in revenue and in profits due to continued enhancement of compensation for producers without regard to book status. Agencies pay producers to GROW the agency’s book of business annually. Providing enhanced income through growth bonuses on the upside requires a declining compensation (to offset some of the agency’s losses) when the book of business, for which the producer is responsible, declines.

If the book of business declines in several consecutive years, the base compensation declines by 1%/year. The agency can institute a maximum reduction (i.e. 5% from 20% to 15%) by adjusting the Minimum Base Compensation in the Compensation Schedule or it can institute the program without a maximum reduction as a method of reducing a producer’s compensation continuously if the producer is not performing his/her primary responsibility of growing the agency’s book of business. The baseline compensation automatically increases annually as the revenue grows (up to the normal level once the book of business exceeds the previously highest level).

Since the Producer’s role is defined by relationship management and referrals more than by simple order-taking, the growth bonus is only paid in years that the producer achieves the minimum required number of add-on sales and referral sales. Add-On Sales include additional lines for the existing client with multiple lines written during the initial new business fulfilling the add-on sale requirement for an account. All forms of insurance, personal, commercial, L&H counts toward the add-on sale requirement. Referral sales are new clients generated from referrals from existing agency clients.

AddOn and Referral goals should be modest for Arising Producers and should grow as the producers become accustomed to asking for each from every client. The AddOn and Referral achievement will make a) the retention of accounts higher, b) generate more revenue for both the agency and more income for the producer, and c) allow the growth bonus to be paid in that year.

Agency Consulting Group, Inc. has designed its Personal Lines Producer Compensation Model to act alongside of the Commercial Lines Producer Compensation Model. It can invigorate and automate your personal lines production if you have decided to use personal lines producers or Relationship Managers. It contains measurement devices for the monthly reporting of gross commissions, new business commissions, cross-selling add-ons and referrals, the key components of agency goals for personal lines growth. These measurement devices (entered by the producers, themselves, whenever possible) collate to annual results compared to goals and historical performance and further collates to career development results (up to 15 years) for each producer.

Call Al or David Diamond to discuss Agency Consulting Group, Inc. conducting an analysis of your agency and staff to determine if the PL Producer Compensation Program is right for you and, if it is, to construct the program for you and to train your agency into its use (800-779-2430 or


The growth of importance, profitability and compensation for Relationship Managers in Commercial Lines responds to the total size of their book of business (new and renewal) tiering for higher total compensation based on size of the total book of business. Similarly the compensation for successful PL RMs is defined by growing total books of business AFTER they validate their initial compensation AND prove they have the skills to both cross-sell (Add On) and to pro-actively generate referrals of new customers from your existing customer base. Call us (800-779-2430) if you are interested in a PL Producer Compensation Program or have further questions.