Most insurance agencies would like to be driven by a regular flow of new business from their producer force. However, most agencies find that their producers (owners or not) spend most of their time caring for existing customers with production relegated to a secondary position. Instead of spending their primary time soliciting prospects to become agency clients, they only have time to prospect and sell when they can break away from service tasks.
However, all producers feel that they should be making more money, whether for non-sales tasks that they perform for the agency, for servicing their existing customers or from sales to new customers. Unfortunately, if an agency is not growing through the efforts of its producers, it has little additional income available to further compensate these key employees.
Agency Consulting Group, Inc. has, for many years, designed producer validation and management programs that are triggered from and attuned to the producers need for compensation. When you begin a conversation with “How much would you like to earn next year?” and when you continue with, “Our job is to permit you to earn as much as you desire from your primary sales efforts,” little doubt is left regarding how a producer can earn more money each year.
Many agencies pay producers a base salary or a draw against expected commission levels with incentive commission for achievement beyond salary or draw basis. When designing a Validation Schedule, all measurement categories must be attuned to the producer’s desired compensation level, a part of which is their base compensation.
The Validation Schedule takes a producer’s historical performance and applies it to his/her production expectation to determine how many Sales Calls, Proposals, Sales and the Average Sale Expectation in order for him/her to achieve the new business required which, combined with projected renewal commissions, will give the producer the compensation level that (s)he desires.
The categories that must be determined and measured follow with an example:
Desired Compensation = $100,000 (The producer’s desired compensation level)
Compensation Base = $75,000 (The existing salary or draw)
Commission Baseline (to validate compensation base) = $225,000 (the amount of commission needed to be generated simply to validate the compensation base)
Commission beyond Baseline validation = 40% (the commission rate that the producer achieves for business in excess of his/her base)
Total Commission Required to Achieve Desired Compensation = $287,500 (derived from baseline and additional commission required to achieve compensation goal)
Commissions Expected from Existing Accounts = $240,000 (projected renewal book)
New Business Commission Required = $47,000 (remaining goal is new business)
Producer’s Average NB Account Size = $2,250 (Commission – from producer’s history)
New Account Requirement = 21 = 1.75/mo (derived from NB divided by average account commission)
Producer’s Average Proposal to Sales Rate = 66% (from producer’s history)
Estimated Proposals Required = 32 = 2.7 /mo (derived from new accounts and Proposal:Sales Rate)
Producer’s Average Number of Sales Calls to Proposal = 33% (from producer’s history)
Estimated Number of Sales Calls Needed = 97 = 8/mo (derived from required proposals and SC:Proposal Rate)
These calculations accomplish a number of tasks. First, it easily identifies if the producer’s expectations and his/her historical performance are not in sync. If the number of Sales Calls required is far above historical performance or realistic possibilities (as is the case in many new producers whose average commission per account would require a tremendous number of sales calls to achieve goals) it is easily noted through this exercise. Sales skills can be honed to achieve a higher SC: Proposal Rate or a higher Hit Rate (Proposals: Sales) that would lower the number of Sales Calls needed to accomplish goals. Or, the agency or producer could concentrate on larger accounts to permit more to be accomplished through fewer sales calls.
If the goals are reasonable, the next step is to measure the results in four significant categories on a weekly and a running year-to-date basis:
Sales Calls – Number of visits made to prospects, not our existing clients.
Proposals – Number of visits made to provide a viable quote and to ask for the sale.
Sales – Number of successful sales
Commission – gross annualized commissions for sales made.
This management tool can be managed by an agency manager, an owner, or by the producer, himself or herself. It clearly demonstrates whether the producers’ efforts are sufficient to yield the desired results and, if not, where the problem lies. If too few sales calls are being made, the responsibility lies with the producer as long as the agency provides sufficient time and leads for the producer to perform up to expectations. If the problem is lack of proposals or sales, sales training is needed (or the agency may not have the right markets or products to sell). If all activity is high, but the results are not up to expectation, then the producer is not targeting the right types of accounts to achieve his/her desired results.
You can design these Validation Schedules and Management Programs yourself in Excel or manually – or you can use the Agency Consulting Group, Inc.’s Producer Validation and Management Program, a program tailored to your particular market, agency and producer needs that provides you all of the information discussed above and the management tracking device that will show you and your producers if their activities are providing in the desired results. Simply call us at 800-779-2430 or see information about this product at our website, www.agencyconsulting.com.