What types of producer compensation schemes are in use out there?

[Undercover]

In my work on the carrier side, I haven't had much exposure to intra-agency stuff. One of the things I'm pondering is what makes effective producer compensation?

It seems customary to have some commission split between the producer and agency - is producer gets 60% of nb and 40% renewal customary, or does it vary a lot from agency to agency? Also, how often are producers pure commission versus some base + commission? Are there any rules of thumb to follow?

BTW - I'm primarily talking about personal lines right now.

Thanks for sharing your thoughts & experience and have a SAFE and HAPPY New Year's!

 

[somarco]

"Compensation schemes."

Are you British?

Other than crooks, I have not heard that term used in the states to describe compensation. Brits refer to schemes . . .

 

[Expat]

"Compensation schemes."
Are you British?
Other than crooks, I have not heard that term used in the states to describe compensation. Brits refer to schemes . . .

Mostly as "scams" as in Ponzi scheme.

 

[somarco]

Reading some of the e-news that comes across my desk on the industry, British colonies (current & former) typically refer to insurance plans as schemes and I doubt they know who Charles Ponzi was.

 

[Undercover]

"Compensation schemes."

Are you British?

Other than crooks, I have not heard that term used in the states to describe compensation. Brits refer to schemes . . .

Nope, not British. Just been hanging around inside carriers too long, I guess. There's a great deal of belief that if you give agents gas cards, etc., for selling your policies, they will place more business with you - that's what made the term "scheme" stick with me.

 

[FELLNINS]

Nope, not British. Just been hanging around inside carriers too long, I guess. There's a great deal of belief that if you give agents gas cards, etc., for selling your policies, they will place more business with you - that's what made the term "scheme" stick with me.

I place business with the company that offers my client the best price for the best coverage...........with a nice commission (that is my paycheck ).

 

[J.R.]

Nope, not British. Just been hanging around inside carriers too long, I guess. There's a great deal of belief that if you give agents gas cards, etc., for selling your policies, they will place more business with you - that's what made the term "scheme" stick with me.

If you want to help agents out give them VISA gift cards. I just got a nice VISA gift card from the local Regional Manager for the holidays and used it to buy STUFF that I wanted.....but more importantly, stuff the LADY WANTED

 

[somarco]

if you give agents gas cards, etc., for selling your policies, they will place more business with you

Carriers are stupid. They think if you throw more money at an agent you will get more business.

If a carrier were to offer me 30% to sell their plan, but they aren't competitive or don't know how to underwrite, they won't get my business.

I look for good value. Plans that I would buy if I were the client. I don't sell junk just to earn a commission.

Rates and value are the starting point. If I can't get the app through underwriting on a timely basis, and with a fair offer, the carrier will not get my business.

Sure, there are agents out there who will sell anything for a buck. They sell based on price by pushing a stripped down product that comes with advance commissions. Is it the right plan for the client? Probably not.

Carriers who cater to those kind of agents will soon find their approach coming back to bite them in the butt.

You posted this in the P&C forum, and I really can't comment on that business. My background is health. Working for carriers on the inside and working in the field as a consultant and personal production. But it really doesn't matter. Most HO's are staffed by idiots who never had any real world experience in the field, or are so far removed from it they forgot what it takes.

I can probably count on one hand the number of HO execs who really understood the market, and what drives business.

If you want my business you need to give me the following:

Competitive products with value.

Flexible products that meet the needs of the client.

Fast underwriting that is rational.

Sure, bonuses are nice as are other compensation incentives. I never cared for trips but those are big with carriers.

Give me solid plans, good communication with the agent, good customer service, sane underwriting. Do that and you will get my business.

In other words, make my life easy. I don't need to spend time arguing with carriers over something stupid they want to try.

Going to do battle with 2 carriers today over issues. I am loaded for bear.

 

[Chkndinner14]

In my work on the carrier side, I haven't had much exposure to intra-agency stuff. One of the things I'm pondering is what makes effective producer compensation?

It seems customary to have some commission split between the producer and agency - is producer gets 60% of nb and 40% renewal customary, or does it vary a lot from agency to agency? Also, how often are producers pure commission versus some base + commission? Are there any rules of thumb to follow?

BTW - I'm primarily talking about personal lines right now.

Comp for sub producers is all over the board for personal lines. Here are the most popular methods.

In no particular order.

1. Selling customer service rep- Sub agent does both sales and service and receives a small set commission amount per deal, $5, $10. Most of pay is base or hourly.

2. Split of new and renewal with a base, amount of base will be the determinant of how high the renewal commission split percentage is. The higher the base the lower the splits.

3. No base, split of new and renewal commission. Higher front and back end commsion splits.

If you are good, 3 is the best option for the subproducer. But, you need some money in the bank, or a working spouse to make it. The reason 3 is the best is you are getting a higher chunk of the rewewal, and isn't that one of the reasons you want to be in the insurance biz?

 

[Undercover]

Wow, it looks like I hit on a touchy subject!

Thanks for all the input, but let me clarify - I am not at a carrier anymore (in part for the reasons you guys pointed out in your replies!). You don't know how many times I've sat in meetings with the topic of how to incent (I know that's not a word, but that was always the meeting title) agents to sell more of our business.

I've struck out on my own as an independent agent and am thinking to the future when I can add producers. I'm just wondering how producers are typically paid by the agencies they work for and what a few pros/cons are for each flavor.