Matt Bartels: Over 80% of insurance carriers are unhappy with the results of their sales compensation program. So if you have the same feeling, you’re not alone. However, there are people out there that are doing it right. I’m here with insurance expert John Drosos from the Alexander Group to talk about recent findings from the most comprehensive survey in the marketplace on insurance carriers and their sales compensation practices to date. John, tell us a little bit about what we found.
John Drosos: Well, what we found was inconsistency. So we know there’s a lot of pressure in the insurance industry, especially on cost. There’s a drive to grow, but to do it in a cost effective manner, there are challenges in selling models from the employee perspective with online and agent models. So what we found is interesting. There are consistencies out there. So as far as pay goes, traditional practices around commission rates and things like that, particularly for agents, but a lot of inconsistencies. So at the leadership level, for example, a lot of companies are still using flat commissions. So a flat commission for a leadership role is something that is generally not that effective, but it’s fairly common. Employee-selling models found was that there’s quite a variation. So, you know, there are some good practices, a lot of practices we recommend if you really, truly want a selling role to be effective, but they’re all over the map. We have roles selling roles that have 5000 of target incentive and a full full commission. We have other roles that have 40,000 target incentive and very complex plans with 7 or 8 measures. These plans should be a little cleaner and a little bit more consistent. On the agent side, pretty consistent as far as how they get paid with commissions. A lot of inconsistency, though, in support programs. So some carriers really support their time outside of core commission. So a lot of room to improve out their. Standard practices may not cut it for a majority of roles or lines that you’re selling out there. Given all the changes in the challenges we’re seeing in the marketplace.
Matt Bartels: Yeah. So one of the things that we know is that growth expectations for organizations is still there. So we’re expecting them to grow. However, this is a unique case this year. Um, in our trends research that costs have increased at the fastest rate that they’ve ever grown in the history of our survey. We’ve been doing this survey for over 25 years here. So the pressure that’s being put on the sales organizations talk about how they’re handling that pressure and how they’re using comp to help drive different initiatives.
John Drosos: Yeah. So Matt, you’re talking about broad based economic pressure. It’s even worse in the insurance space, right? Because you know, costs are going up significantly, loss ratios are very high. So the profitability is just not there. And companies are doing everything they can to at least get profitable as they also struggle for growth. What from the survey perspective, what we found is that they’re not necessarily doing a lot to put their selling model to combat this. They are focused on controlling commissions to some degree, lower base salaries, basic cost cutting that we got a sense that they’re doing. But nothing fundamentally has changed in the plan. So for instance, we’re not seeing a lot of emphasis on profitability. Only about 10% or 20% of leadership roles, for example, have a profitability metric in there. So, I would say that maybe operationally insurance companies are tackling the cost issues, but on the sales side, I think they’re struggling.
Matt Bartels: Yeah. And they’re really focusing. I see some of the people that are doing it right are that are taking advantage of the comp plan, are really doing things differently with how they’re incenting their leadership teams.
John Drosos: Correct. Yeah. So we see a lot of companies just paying a flat commission rate out there to their leadership teams. That is an old school practice and that doesn’t work too well when the dynamics of the market change, when you have to shift the behaviors of your sellers. So I think something like 30, 40% or more of senior leaders and we’re talking VPs, we’re talking directors here are on overrides or flat commissions. Other insurers have much more sophisticated plans, but even there we see issues where perhaps there’s not enough incentive there for the leaders. Some companies have some carriers have a plan that has 20% of total pay is on incentive, others upwards of 40 or 50. So again, inconsistencies, a little bit more sophistication with some carriers, but a lot of room to improve.
Matt Bartels: So, if folks want to find out. So we’ve got over 55 organizations in the survey, including the majority of the top ten, if they want to find out what the leaders know, what is included in this study?
John Drosos: So this study covers PNC, life and financial and small commercial. We did not tackle the full large commercial or specialty market out there. It covers employer roles, it covers call centers, it covers agents, captive and independent, and it also covers leadership roles. So all rolled into one. We have the pay levels in the more comprehensive data we will share with participants. But the overall summary findings we will share with the broader audience.
Matt Bartels: So if you are interested in seeing the results from the most comprehensive study on insurance pay practices in modern time, and knowing what the leaders know, how could they get access to the report?
John Drosos: Fill out a request form at Alexander Group.com and we will get in touch with you.
