KEY TAKEAWAY:
--11% of carriers say it takes more than 60 days to pay their brokers, which can fray relations. More often than not, back-office vendors are needed to provide transparency in the commission process. Vendors' agency management systems receive carriers’ commission feeds, accurately complete the commission accounting and even pay the commission directly. They can support all commission structures and custom compensation types, meaning they can handle complex hierarchy structures to process payouts--and greatly reduce delays.
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Despite the crucial role that brokers play in the life insurance industry, they are underserved and under-supported by carriers.
Recent research from Equisoft reveals that the issue is exacerbated by a lack of technology. According to the study, three of the top four challenging aspects of the broker-carrier relationship are the lack of tooling, inability to track compensation and performance in real time and lack of digital capabilities.
If brokers are going to continue to provide exceptional customer experience and customer service — something that is more difficult to do with changing customer expectations and the presence of easily accessible, on-demand products and services in other industries — they need to have the technology and resources that can help back them up. This includes the use of online appointment scheduling software, mobile applications, voice agents, SMS/text, digital service portals and many others.
Issues also arise with the commission accounting process. While base commissions and brokers' First Year Override aren’t particularly complicated, commissions can become complicated when there are differing compensation agreements for different products, when there are split commissions and when people retire — to list a few examples.
Commissions are complicated by the fact that 11% of carriers say it takes more than 60 days to pay their brokers, according to the study. For most other industries, employees are paid on a regular, weekly, biweekly or monthly basis. This consistency, predictability and, most importantly, timeliness enables workers to budget and create financial plans for themselves. Brokers should be afforded that same respect and be paid promptly.
When it takes too long for them to be paid, they may start talking to other brokers about their situation — potentially influencing which carriers brokers pursue relationships with and for whom they will advocate.
While these issues are caused by technology, they can also be fixed using technology — specifically through digital transformation and by updating outdated legacy systems.
See also: Breathing Life Into Life Insurance
For brokers relying on aging agency management systems (AMS) effective, efficient and accurate management of commissions may be difficult.
While the study reported that 75% of brokers use an AMS to manage their relationships with carriers, 43% of respondents indicated that they planned to update their AMS in the next 12 months.
Brokers expect that, as the industry evolves, the way they are compensated will evolve, too. The challenge is the lack of transparency between carriers and their brokers about the commission process.
More often than not, back-office vendors are needed to provide transparency in the commission process. Vendors' AMS receive carriers’ commission feeds, accurately complete the commission accounting and even pay the commission directly. Additionally, they can support all commission structures and custom compensation types — meaning they can handle complex hierarchy structures to process payouts.
Updating these systems and offering more digital sales and service enablement solutions leads to better broker experiences. Instead of spending time working through manual processes or worrying about when their check is going to arrive, brokers can focus on what matters most: delivering value to policyholders and providing exceptional customer experience.
