You hired a producer! Congratulations! Whether the producer is an experienced insurance professional, an experienced sales professional or someone with a great personality who needs to be trained in business and sales, you’ve taken a step forward toward growing your agency.
When we discuss what we expect from our new producers we find that every producer is somewhat different from every other producer. Some need the security of a salary or draw to make a move while others are confident in their ability to convert prospects to clients and simply want you to provide him the “seed” and he will cultivate it and make it grow into a fine crop of clients.
But the unusual thing about producers remains that each agreement is slightly different because their motivation for success is different.
When you shake hands and agree to work together, the agreements about what the producer is expected to do and what you and the agency are expected to do to make the producer successful is crystal clear.
Unfortunately, six months from now and six years from now those crystal clear lenses will have been coated with several layers of rose colored glass and both of you can’t remember the points of your agreement as clearly any more. This problem is solved if you commit your agreement to paper and have a legally binding document drafted that expresses the points both of you agree upon at the outset of the relationship.
The Producer’s Responsibility:
What do you want the producer to do? What does the producer expect of himself? The simplest terms involve the expectation of revenue generation. Please, never use premiums when discussing internal measurements of success. Premium is what the customer pays the insurance company. The only dollar amount important internally to the agency and to the producer is Commission Income. That’s what pays the bills including producer compensation. The celebration of a $10,000 commission policy is much more impactful than the celebration of a $10,000 WC policy premium (that may only pay 3% commission).
A better measure of a producer’s success is the measurement of SALES ACTIVITY. Sales Activity is any time a producer stands before a prospect or a customer with the goal in his mind to be available to protect the client’s assets through the providing of new or additional insurance products. It shouldn’t be a secret or a surprise that the producers who see the most prospects and clients the most often tend to sell more insurance than the producer who only visits a few clients and prospects every week. The best agents in the country are out of the office 80% to 90% of the time, splitting their time between visiting clients to cement relationships (and gain new referrals) and visiting people that we do not yet insure to show them how unique the producer and the agency is compared to their current supplier of insurance.
A good producer agreement specifies what you and the producer agree would be a strong level of sales activity and the revenue generation that would result from high sales call rates.
The Agency’s Responsibility:
We often use a Producer Agreement to specify what a producer must do. We less often specify how the agency can help the producer achieve success.
The things that help a producer most are those activities that put the producer on the street instead of allowing or forcing the producer to stay in the office handling service and administration. We hire the producers to be our face to clients and prospects. Why on earth would we have the producer touching the computer or files? They are rarely as good at those tasks as the service and administrative employees that we can hire at lower costs who are more detail oriented. And they either use the office to hide from the public or are frustrated when they feel they must be in the office because they can’t get the customer serviced otherwise.
Detail, in the Producer Agreement, what services you will provide to the producer to give him maximum sales time to succeed for himself and for the agency. Those services should include administrative help to relieve the producer from as much in-office work as possible.
The services provided should also include the generation of prospects in sufficient numbers to keep the producer busy 100% of his time between customers and prospect calls. If you look at any other industry you will find that we are the only sales industry in which the host company is not responsible for the generation of prospects. I remember the “good old days” when the agency owner would hand you a phone book and tell you to go out and sell insurance. That’s the best way I know to frustrate and lose valuable employees from the insurance industry. Meanwhile, the agency owner recognizes what types of clients and prospects could best be served by the agency’s and its carriers’ skills and knowledge. Why not use agency resources to gather and market to those prospects using our dedicated producers to meet those prospects and build relationships toward making them customers.
It may take time, but that’s the role of the producer and the role of the agency.
Compensation:
Whether salary, draw or commission, it is incumbent on the agency owner to draft what you invent to motivate and reward your producers into an agreement that is clear and easy to understand for both of you. You’ll never refer to it when the producer is too busy with sales to read it. You’ll need that document reference when things aren’t as good as you would like. Include validation programs, commission and bonus programs in the Agreement. Call Agency Consulting Group, Inc. and we’ll help you with Producer Compensation Programs that are tailored for your agency and for your producer.
Include all benefits that you’ve offered a producer like insurance, pension program, car allowance and phone. By the way, offering to pay for a producer’s cell phone and using his personal device for agency business is a recipe for disaster. BUY THE PRODUCER A DEDICATED TELEPHONE OWNED BY THE AGENCY. Why? If the producer leaves and you have an agreement that the producer can’t solicit your clients for some period of time, if the only phone he has for business is his personal phone, how does anyone stop him from accepting (or making) calls to clients under the guise of personal relationships. Most producers make friends of their clients. On the other hand if all business related calls are made using a business line and business device, if the producer leaves and tries to communicate with clients in opposition to his Producer Agreement, those phone records can be subpoenaed and he has no reason to make or take calls from agency clients after departing the agency’s employ.
What Happens if the Producer Leaves?
Non-Competetion? Non-Piracy? Non-Solicitation? Non-Acceptance?
No one wants to consider a parting of the ways when you’re just hiring an individual. It’s a real “downer”. But if you don’t execute terms in the event of the departure of a producer when you hire the producer it becomes severely onerous and limiting to do so later.
Non-Competition – in the “olden” days a Non-Compete Clause would prohibit a producer from competing with the employer within the employer’s marketing geographic area. This simply doesn’t work anymore since the courts have determined that, short of an indenture, you can’t stop someone from performing the work they know to earn a living where they live. It would be ludicrous for a Plumbing Contractor to try to forbid a plumber in their employ from leaving for another plumber by telling him he can’t work as a plumber in the only city he has lived. The courts have adopted the same general attitude for insurance agents. Don’t try to limit your employees from working in the insurance industry. However, you CAN forbid them from using the information that is confidential to the agency gathered on the agency’s clients to solicit those clients away from the agency.
Non-Solicitation – This agreement clause basically says that since the employees were paid by the agency to produce, service and administer the insurance programs for the agency’s clients it is appropriate to agree that, if the employee leaves the agency, that they cannot solicit the clients (or actively solicited prospects) of the agency for a period of time during which the confidential information in the agency’s files are fresh and not available in the public eye. The non-solicitation period is often from one to three years after which the original confidential information gathered on the clients become stale and must be re-gathered, either by the host agency or by any other agent desiring to work with the client.
Non-Piracy – While Non-Compete and Non-Solicitation applies narrowly to clients that the producer or CSR has worked with directly while employed at the agency, Non-Piracy applies to all other clients and prospects of the agency for whom the employee had access to data but may not have worked with directly. This is directed to the employees who try to generate an expiration list of all clients and market it to other agencies to help them get a job.
Non-Acceptance – What happens if an employee leaves and DOESN’T “solicit” the agency’s clients. If executed properly this form of agreement prohibits the former employee from accepting clients for sales, service or administration for a period of time agreed upon by the employee and agency when the employee was hired. We all accept that a customer has the absolute right to go wherever they want for their insurance program. However, this form of agreement limits the former employee from working on the customers’ insurance accounts for the period of time agreed upon while the agency attempts to replace the employee as the relationship manager with the agency’s clients. While the client can certainly go wherever they want, the Non-Acceptance wording, if clear and properly executed, forbids a former employee from accepting that client for the agreed upon period of time nor accepting any form of remuneration for the acceptance of that client by any agency with which the employee has a relationship. The Non-Acceptance wording supplements the Non-Solicitation clause to assure that the host agency has a fair amount of time to cement their relationship with another agency employee or producer before the client can move to any agency that has hired the host agency’s former employee.
Never hire an employee without consideration of the sections of the Agreement to which the agency and employee have agreed. These points protect both the agency and the employee from eroding relationships and terminations and clarify how both agency and employee are expected to perform for one another to their mutual success.