One of the greatest problems experienced by most traditional producers who become involved in the servicing and retention of clients as well as the adoption of new clients is that they work themselves out of the sales role due to their sales success. These producers are paid in the form of New and Renewal Commission or as Base and Growth Commission since they spend their time with both prospects and existing clients. The problem producers face that causes agencies to lose the sales capacity is that if successful producers spend their time visiting existing clients for retention, they reduce the amount of time available to prospect and build relationships and to sell insurance to new clients. Traditional producers work their way out of new business production and eventually spend most of their time retaining the book of business they have created while selling only on occasion when referrals are sent their way.
Agency Consulting Group, Inc. has developed a software product called the PROSPECTING SUITE consisting of integrated modules designed to help producers identify the amount of time available for prospecting after existing customer maintenance, calculates the minimum account size requirements of prospects based on the producer’s annual compensation expectations, and identifies the producer’s prospecting capacity and potential revenue generation. For more information click here or call Agency Consulting Group at (800) 779-2430.
Many traditional producers work their way out of a production role and into an Account Executive role while still referring to themselves as producers. They certainly remain valuable to the agency since agencies are built by a combination of retention and growth. However, if the producers aren’t replaced and supplemented with new sources of clients, the agency’s growth stabilizes and then deteriorates as the client base ages out. Once a producer has left the stage of regular production aimed at growing the agency’s book of business, it is very difficult for them to regain the “fire-in-the-belly” that motivates true producers to face the challenge of making friends and building trust relationships with new prospects on a regular basis.
Unless the agency is lucky enough to have hunters in their midst, producers who prefer selling to servicing, as owners or producers, the life cycle of the business is defined when the producers’ books of business are large enough that the producers are financially comfortable, and when the producers’ time is spent primarily dealing with service and retention-based duties rather than new business production.
Three things can be done to change the cycle and activate growth in an agency;
1. Add young producers every few years who are hungry and are writing younger clients to re-invigorate the agency’s client base as older clients die, leave or sell their insurable businesses.
2. Reduce commission rates for existing producers if their books of business are decline.
3. Relieving the producers of the lowest levels of their clients on an annual basis to provide them with the time to prospect for new agency clients while releasing them from servicing responsibilities of their smallest accounts.
Adding Young Producers
Young, inexperienced producers can be a challenge to some agencies. They require as much as three years of investment as they succeed and learn the trade. During that development time, these producers should be validated with activity based production goals. Agency Consulting Group can assist you if your agency needs to build a new producer validation program.
Option Two – Paying Higher Commissions for More Profitable Producers and Lower Commission for Regressing Producers
Agency Consulting Group’s Producer Compensation Program creates an incentive-driven compensation model for producers who grow the agency’s books of business. By tiering compensation, the most successful producers are paid higher commission levels as their books of business become more profitable to the agencies. If a producer cannot grow their book by a minimum percentage each year, or if the book of business deteriorates, their commission rate is reduced from standard producer commission levels toward the commissions paid to Account Executives. A PRODUCER is expected to grow the agency’s book of business annually. If a book of business declines, the motivated producer will spend more time building relationships and generating new clients for the agency to reinvigorate the growth of the book of business.
Under the dynamic compensation program created by Agency Consulting Group, Inc., an employee’s commission rate can change as their role changes, in support of growth and/or retention.
Option Three – Buying Down Producer Books of Business to Release Time for NB Sales
The third option occurs when producers are frustrated by their client load but would devote more time to sales if given the opportunity.
The agency may help these producers most by “buying” their lowest level of clients – the clients that take the producer’s time for an annualized commission insufficient to grow the producer’s compensation level or the agency’s book of business. The agency offers to take over the servicing and retention responsibility for the producer’s lowest level of accounts to provide the producer more time to spend on sales calls to businesses not yet insured by the agency. Typically, these accounts make up a very small portion of the producers compensation but releases an inordinately larger amount of time that the producer may use for sales calls to prospects. A variety of options exist for continuing compensation including shifting commissions or paying the producer a one-time fee to give up these accounts.
Occasionally producers are paid renewal commissions for accounts for whom they offer no services and do not visit nor maintain a relationship. Giving producers on-going commissions for accounts for which they perform no service puts the agency in a precarious position since there is no incentive or reason for the producer to give up these accounts in favor of new sales. They sold the account years previously and the account is retained or leaves based on the grade of service provided by the administrative employees of the agency with no intervention by the producer.
If the accounts are referred to a new or to another producer for relationship management, commissions on those accounts may be split for the first year to accommodate the conversion without negatively affecting the producer. In some cases, the agency has given the producer twice the compensation that would be earned for these accounts to prompt the producer to release the accounts.
Whether you choose Option 1, 2 or 3, the importance of activating producers who will grow the agency’s book of business cannot be sufficiently stressed.
Al Diamond is the President of Agency Consulting Group, Inc. a national consulting firm for independent agents in the U.S. and brokers in Canada and the author of the PIPELINE, a national newsletter of agency principals in continuous monthly publication since 1987. Al can be contacted at al@agencyconsulting.com and through www.agencyconsulting.com (800 779 2430).