How Do Carriers Ensure Their Selling Models Drive Profitable Growth?

Key actions carriers must consider to build a go-to-market strategy.

Insurance selling models are rapidly changing, and carriers must stay ahead of these fundamental shifts. Alexander Group’s recent survey with executives across property and casualty, life, commercial and personal lines provided insights on current market trends, sales roles, sales channels and compensation programs. In a recent webinar, Ernie Wolansky, a former sales compensation strategy and design team lead for a large property and casualty insurer, discussed the survey findings with us. In summary, carriers must consider five key actions to build a profitable go-to-market strategy in today’s environment:

1. Develop a robust online/mobile strategy that is integrated across sales channels
2. Assess the productivity and effectiveness of traditional channels to market, whether external or employ-based
3. Invest in sales and marketing operations to better enable and support all sales channels
4. Ensure that traditional commission plans are driving the right behaviors in priority lines and market segments
5. Utilize additional bonus plans to give more flexibility to reward top agents / brokers and those who drive consistent growth

1. Develop a Robust Online/Mobile Strategy

Survey participants see the most growth in utilizing online/mobile channels and independent agent channels, with online/mobile having the highest expectations for growth and investment. When it comes to best practices for integrating online/mobile channels and doing it with the optimal incentive structure, almost all large personal lines carriers have a dedicated online channel for customers who prefer to do business without direct contact with a traditional agent. Most of these companies have robust online portals and make significant investments in advertising to drive customers online. For online/chat support positions, small per policy closing incentives are often effective and expense-efficient for carriers to complement online sales.

This online infrastructure should be integrated with agent channels to meet the ever-increasing customer demand for self-service (including adding/making coverage changes and buying additional policies). Carriers need to build service capabilities for their customers and agents as a cost of doing business, while designing sales compensation plans and commission rates accordingly. Best practice is to “price-in” online support into the commission structure for all policies. Separate or reduced compensation structures that penalize an agent when an existing customer chooses to do business online opens the door for channel conflict/complexity.

2. Assess the Productivity and Effectiveness of Traditional Channels to Market

Historically, carriers have had a marked preference for external sales channels (agents and brokers). However, about a third of carriers use employ-led sales channels, where at least 30% of premium is driven and supported by employ sellers. Managed effectively, employ sellers can be an advantage as they allow carriers to pivot more quickly on growth strategy compared to external sellers. Best practices include utilizing quotas, minimizing number and complexity of measures, minimizing attrition rates, and maximizing premium and policy growth.

While advantageous in some cases, employ sales channels are stagnating/declining due to cost concerns and talent management. One key driver of this is cost―primarily fixed costs. Base salaries account for 65-90% of total compensation for employ sellers; and with benefits in the mix, fixed expenses take up an even larger portion of sales costs.

In the competition for a preferred channel to market outside of online/mobile, independent agents come out on top. This is not necessarily driven by cost, as commission rates are generally higher for independent agents. But rather it’s based on flexibility. The best independent agencies are sophisticated and flexible businesses that can easily adapt to changing consumer/business needs and carrier strategies.

3. Invest in Sales and Marketing Operations

More resources, better seller support and a comprehensive marketing strategy are by far the top focus areas to drive growth within selling models. Many carriers plan to use technology and update commissions to make incentive programs more effective. However, sales process gaps and lack of sales tools are the top challenges. Insurance carriers are also more cautious about adding additional employ-based roles to support these new platforms and technology.

How do you maximize the efficiency of your selling and marketing operations? A best practice is to invest in well-balanced back-office teams that make sure your sales and marketing budgets, and your sellers’ time, are spent efficiently. Insurance carriers that have an established sales and marketing operations team have higher growth at a lower cost, focusing on strategies to make sellers more effective.

4. Ensure that Traditional Commission Plans are Driving the Right Behaviors

For a variety of roles, including online sales specialists and strategic account managers, insurance leaders are evaluating three core areas to make commission and bonus plans more effective.

Business Alignment

• Online channels are growing fast, but quality agents still need to be incented to close sales.
• Getting the right commissions and bonus plan for agents is crucial for attracting talent. Most carriers have significant differentiation between new and renewal premium commissions.
• With the proliferation of remote work, it is easier than ever for agents to move onto a better opportunity.

Improving Commissions/Bonus Plans

• Most carriers state that their existing bonus plans are very complex.
• While regularly benchmarking commission programs, carriers need a better bonus program for consistent performers.

Leveraging Technology

• Setting the right commissions and goals is complicated.
• Many are investing in software to get more accuracy.
• Leaders are tracking data through tech upgrades and artificial intelligence to set the right rates for agents.

5. Utilize Bonus Plans to Reward Those Who Drive Consistent Growth

Carriers are working on designing the payout model to make it more attractive for agents. It is a common practice to use additional bonus programs to incent non-employ sales channels. 60% of carriers utilize separate, add-on bonus programs for their agents/brokers outside of commission rates. Carriers use a variety of incentive plans with ‘new policies’ as the most common measure.

There is limited consistency in bonus payouts, with some firms paying 1-2% in additional incentive, while others top 10%. Practices are not uniform and carriers paying out less than 5% of agent commissions may not be driving agent/broker behavior.

Carriers utilize a wide variety of bonus metrics, with the primary components focusing on retention/renewal measures, new business measures and growth measures (over prior year). Nearly 90% of respondents weighted a particular line higher for a bonus program.

To be more effective, insurance carriers should broader participation (30%+ of agents) and utilize separate, more flexible bonus programs to drive strategic behaviors. In addition, ensure add-on bonus programs target a broad portion of agents and that payments are meaningful (5%+ of core commissions) for consistent performers.

Access the full on-demand webinar to explore some of these topics.