This is a dangerous post that could be explosive if put in the wrong hands. It’s for insurance agent’s eyes only. Company people should pass on this one.
Insurance agents don’t care about commission, new business overrides, bonuses, contingencies, or any cash incentive. Elliot Spitzer should have read this post. If you are an agent I hope you are screaming by now, because this is a bold and damaging claim, that needs to be proved wrong.
Here’s my evidence. As stated before I spent many years with Progressive Insurance. Progressive is notoriously known for paying some of the lowest commissions in the industry. While most carriers pay 15-12%, Progressive pays 10%. At one time a large majority of their agent only were paid 7%. As a marketing person for Progressive, we would yell at management all the time, that we could increase new business if only we would increase commission to industry standards. Management would calmly come back and say commission did not matter, rate and ease of doing business drove an agency’s decision to place business. We argued, and argued and got no where. Then something mind blowing and shocking happened. Progressive picked a state to do an experiment. They rolled out a product that gave multiple commission levels for agents to choose from. This was outside their normal 15/10/7 choices. Obviously the lower the commission picked, the cheaper the price. They took commission as low as possible to see how low they could go and still have agents sell the product. Sadly, they discovered that they could offer 2% and still have a significant amount of sales made. This reinforced their belief that rate and ease of use drove sales, and our argument was shattered.
Upon leaving Progressive for more mainline, standard IA companies, this awful truth continued to persist. Many, many times I have given agents overwhelming new business overrides, and it had no impact on production. This made it difficult for me to get future monies for the agency, because I had no proof that money made a difference. Recently a good friend that works for a large national carrier told me that she is giving a 9% new business to an agent in order to help the agency roll a book they are losing. This makes total commission at 23%. The agent has almost written nothing with her. He is placing almost all the business with a company that is paying only 12%. He could double his revenue but is not. When pushed as to what is driving the decision, he claims rate and ease of use. Upon digging into the numbers, she found that she was often cheaper than the company they are losing, but the 12% company was cheaper still. The agency only needed to beat the current carrier in price, not find the cheapest in the agency. This is further degrading the revenue.
So what conclusions can be drawn from these anecdotes, and painful stories.
First, determine whether this is true of your agency. Who’s controlling where your business is going and why? What is it doing to your overall agency revenue?
Second, and most important, when given extra money incentives from your companies milk those things for all they are worth. If so, you are sending a message that revenue matters!