Love them or hate them, commissions are part of insurance agents' lives. While they act as an incentive for agents to sell more policies and better service their customers, the challenges of accurately calculating the variable commissions throughout the year is an administrative headache and can often be an underlying cause of employee dissatisfaction, adding to business risk. Better managing commissions can give agencies a competitive edge, keeping staff happy and eliminating costly mistakes.
The commission structure, however, can become incredibly complicated to calculate. During the year agents will deal with multiple insurance carriers, each of them paying a commission on policies sold. These payments will then be divided between the agency and the producer. The amount paid and the split percentage, however, are calculated on a host of variables such as the type of policy, the policy period, and specific terms.
There are also often problems with the commission statements generated by carriers such as inconsistent file formats, missing information and text that is hard to read.
In addition, there are very few systems designed to handle these specific calculations and so in most cases businesses are left to rely on dedicated administrators (and in some instances entire teams), to manually process the calculations. This suboptimal environment will inevitably lead to mistakes that can carry hefty consequences.
The solution for agencies looking to keep their commission calculations transparent, accurate and immediate is to turn to an automated solution that is powerful enough to deal with multiple data sources and complex commission parameters.
The sheer volume of commission hierarchy combinations that exist between different carriers, agencies, and intermediaries are a recipe for disaster. Insurance carriers will negotiate different commission structures with each agent they work with based on a variety of incentives. Every agency will in turn have their own commissions split based on how they want to incentivize their employees. The problem arises when errors creep in and agents begin to mistrust the math and try their hand at managing the calculations. This ‘shadow accounting’ injects an insidious culture into a firm and leads to deeply unhappy staff who spend more time checking up on the admin than chasing down leads and servicing their clients. When trust breaks down, the whole firm is put at risk.
Financial pressure on agents is coming from all sides and showing no signs of slowing down. Consumers are increasingly making cuts on what they see as grudge purchases, including insurance, in an effort to deal with rising costs of living. In the UK a recent survey found that of the consumers who had to change their cover in an attempt to save monthly costs, 43% had chosen to completely cancel some of their policies.
This uncertain environment places added pressure on agents who are relying on commissions and who are themselves dealing with the same inflationary challenges. It’s not surprising then that the accurate and timely calculations of commissions is a crucial part of running a happy and successful insurance business.
Synatic is a Data Integration Hub (DIH) that can automate the entire commission calculation process from end-to-end. The DIH has pre-built and fully customizable connectors and other integration tools for accessing a wide range of data sources. This includes carrier websites and their commission statements.
The data from these sources is loaded into a staging area where a rules engine can be built to automatically calculate Direct Bill Commission (DBC). This can be customized to the specific requirements of the insurance agency. What’s more, the output can be converted into a file format that the agency management system (AMS) can read, such as AL3 and XLS. It can also be sent in an email format to the agent, or the final commission report can be generated in the AMS. The automated system results in fewer suspense items being created. This allows the agencies to align data prior to it being inserting into an agencies AMS.
By automating the commission calculation process agencies not only drastically lower the negative impact that human error has on commission calculations, but also ensures a higher level of transparency in the calculations. The data that comes with these reports also allow leaders to make more informed business decisions and, most importantly, gives agents a strong sense of security, reducing their daily stress, and benefiting the business.
It’s clear that when it comes to automating commission calculations, the benefits are far greater than just ensuring accuracy, but can bring a welcome predictability to this potentially combustible aspect of agency management. If you want to learn how you can improve remove the stress of dealing with commission calculations, Synatic contact today.
