Strategic Management for Independent Insurance Agents & Brokers: Positive Change for Sustained Excellence

Monday, July 5, 2010

Producer Compensation – Profitability Drivers

“I’m paying producers too much and it’s causing a problem with bottom line profitability.” Well, maybe. Sometimes it’s not just simply the percentage of commission going to the producer. Sometimes there are other factors that impact profitability.

Part of our Producers as Profit Centers tool looks at servicing costs for each producer book of business. You should expect to see some disparity, especially where CSRs are assigned to business based on producer. Since producer books vary in size, so with CSR books. If those disparities are too great, however, you may need to look at realigning teams to even out the workload. Everyone hurts when some are overworked and some don’t have enough to do.

Sometimes the workload disparity is magnified when there is a big difference in average account size. Account size is probably the most significant of the productivity drivers. Where producers have books made up of mostly small accounts, not only will the book likely be unprofitable but the servicing costs are likely to be high unless a conscious effort is made to treat these accounts differently.