Compensation for "captive" Independent Agent?

[djs]

Here's the problem, everyone will tell you that you pay to much and to little, depending how they look at the pay structure. Simply put, there is no right answer, you just need to figure out what works for you.

Start with a realistic target. You need a producer to be earning between $50K-$75K per year, on average. Less than that, they aren't pulling their weight, more than that, they will probably look for greener pastures. There are exceptions.

Then backfill. I like the salary structure (not sure what the right amount would be, but you are probably in the ballpark), so you need between $25K-$50K in commission. Is that possible in your market? Now, is it really possible, or better asked, probable?

Then, once you have their numbers worked out, look at it from your perspective. If you are paying whatever amount you decide to, is there enough left over for you to stay in business and make a profit?

Look at the numbers for him to make $60K, or $5K a month. You probably need to do this on no more than 50% of the commission, which means he needs to be bringing in $10K of commission to you, or probably about $100K in new business per month. This is a challenge in most markets. (note: I didn't work through renewals, retention, chargebacks, or a bunch of other factors you need to think about). For him to write $100K in new business per month, what will that take from the agency? Can you do this with your $5K a month based on what he is producing?

However you do this, it is a tough balancing act between the need to pay a producer fairly and the need to make a profit for yourself.

Dan

 

[Crabcake Johnny]

I tend to disagree a bit. The "punishment" for security in the field of sales is lower pay. He doesn't need to make anything close to what he would as an independent.

I think any comp structure where an insurance employee is earning 75K means you're not making enough profit.

In return for that nice desk, base pay and benefits I'd say he caps out at around 45K to possibly 50K. If he wants to earn more than that he knows where the door is.

He can cry about 40K to 50K and threaten to go indie but he'll likely be sobbing in a corner after he comes to realize that the elusive "100K+" pay he sought as an independent has turned into a foreclosure notice on his door.

 

[djs]

You can pick whatever salary range you feel comfortable with, but you still need to make it work.

In my market, if you have a commercial guy and are only paying him a target of $50K, he will be working for the agency down the street and be your competitor very soon, if he is any good. Of course, most are paid commission, perhaps with a draw, so a salary would somewhat dictate a lower target.

Perhaps I should have emphasized that the target numbers I mentioned above need to be changed to match the market you are in.

Dan

 

[FLInsa]

Not sure if this was clear - I have a producer hired already; he's been with us for several months. He's not a "superstar producer" -- never claimed to be hiring one. In fact, he has been licensed for just under a year. I'm training him from scratch.

I would think this would make some sort of difference.

Well, if this guy is so-so talent then you're right, you've nothing to worry about because after all not many agencies are looking to hire so-so players and chances are you will keep him for a long time.

But if he grows to be a talented player, then don't be surprised if he gives you a notice saying that he is joining a competitor down the street who is giving him renewal, equity and etc equity. I know this because I just took a producer from a smaller agency and that a very easy "transaction".

I hope it doesn't happen to you though.

Good luck!
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Start with a realistic target. You need a producer to be earning between $50K-$75K per year, on average. Less than that, they aren't pulling their weight, more than that, they will probably look for greener pastures. There are exceptions.


Dan

$50k-$75k would be for a producer working for a smaller agency, correct? Because for the big time national producers, they would laugh at a $75k income offer with nothing else offered - just saying... .

But then again it depends if an agency is looking to hire a Lebron James or a John Smith would satisfy.

 

[FL P&C Broker]

I pay commission only on new and renewal business and vested interest after 5 years.

 

[John Bellamy]

Sounds very generous to me... I am working for 35% commission for 2 years then 14%. 3% renewals... I also work my butt off... Too bad Im not in CA...

 

[Guest]

John, your getten ripped off.

 

[Edwardfin]

I tend to disagree a bit. The "punishment" for security in the field of sales is lower pay. He doesn't need to make anything close to what he would as an independent.

I think any comp structure where an insurance employee is earning 75K means you're not making enough profit.

In return for that nice desk, base pay, and benefits I'd say he caps out at around 45K to possibly 50K. If he wants to earn more than that he knows where the door is.

He can cry about 40K to 50K and threaten to go indie but he'll likely be sobbing in a corner after he comes to realize that the elusive "100K+" pay he sought as an independent has turned into a foreclosure notice on his door.

I'm in a similar situation and I'm starting with agents that need to be trained and coached up. I think this is good advice and I also think you will be able to keep a lot more of the agents that turn into good producers than not. You also want to have a plan in case this producer does want to walk.

 

[Tahoe Ray]

I'm in a similar situation and I'm starting with agents that need to be trained and coached up. I think this is good advice and I also think you will be able to keep a lot more of the agents that turn into good producers than not. You also want to have a plan in case this producer does want to walk.

Pretty sure the guy you responded to is out of the business.