When was the last time you looked at how your insurance agents were getting paid?
No matter how complex an organization’s commission structure is, it’s crucial to develop a system that allows managers, executives, administrators, and sales teams to access accurate sales and commission data.
However, managing an agency’s commission structure can be challenging, especially for those in the insurance sector. Industry data shows that insurance agents and brokers manage some of the most complex commission programs. As such, commission management processes in the insurance sector demand greater transparency, control, and automation.
So, what’s the best way to approach insurance commission management?
Some companies run their sales commissions on spreadsheets. Others use insurance commission management software to perform the calculations, tracking, processing, and more. Both of these approaches have their pros and cons.
What is Commission Management?
Commission management is the process of tracking and managing sales commissions earned by selling products and/or services offered by an organization. Commission management encompasses many activities, including:
- Commission tracking
- Commission processing
- Commission calculation
- Formulating sales commission’s policies
- Tracking sales incentives
- Developing commission structure
Commission management can effectively be achieved with the use of commission management software. This software automates the process of calculating and tracking sales and performance-based compensation.
3 Surefire Ways to Streamline Commission Management
Without further ado, here are the various ways insurance managers and decision-makers can streamline and improve commission management.
1. Automated Commission Management Process
Automating commission management can streamline the process of paying commissions and make it easier to accurately calculate the payouts, eliminating the risks of human errors. Moreover, automating makes the process transparent, as everyone has access to the data.
Unfortunately, many organizations, including insurance agencies, still rely on spreadsheets and legacy systems to calculate and manage commissions.
Studies show that between 47% and 70% of organizations still use spreadsheets for commission management. While spreadsheets can be a flexible, cost-effective solution for managing commissions, they are time-consuming and prone to errors.
A commission management system overcomes these limitations while improving the accuracy of the calculations. There’s also the increased efficiency that comes with automation. A robust system should be able to do the following:
- Track commission payments
- Manage commissions—including splitting and distributing payments
- Provide agent statements
- Generate commission reports
By using these types of tools, you can benefit from the following.
(i) Simplify Incentive Plan Changes
Most organizations upgrade their sales incentive plan yearly.
Apart from aligning your commission plan to your business goals, adjusting the incentive plan regularly keeps sales reps motivated, which increases their productivity. Commission management software can easily handle these changes.
At the same time, decision-makers can see all the current and historical data through a single-click view to review the sales figures.
(ii) Saves Businesses from Overpaying
One of the drawbacks of manual commission management is that it can lead to overpayments.
With teams growing, a 3 – 5% overpayment can translate to a loss of up to $500,000. So, overpayments can easily ruin your bottom line. Commission management software can help you avoid these losses and provide accurate information to anyone involved.
(iii) Saves Time
When you automate your sales incentive plan, you save time, remove the hassle of working with spreadsheets, and can focus more on tasks that drive profitability.
2. Set the Quota Bar in the Right Place
Accurate quota planning is critical for the success of your sales team.
If managers set the bar too low, producers are unlikely to reach higher. If they set it too high, the reps might feel discouraged and give up.
One way to set the quota bar in the right place is to use historical data.
To set a justifiable quota, look at your team’s history. Ask yourself; what percentage of your sales team hits their quota every time? If less than 60%, it means your quota is too high. Conversely, a 100% attainment implies your quota is too easy to reach.
Try to hit the sweet spot between ambitious and achievable.
Achievable quotas will drive your business goals while keeping all your producers motivated. Unrealistic quotas, on the other hand, foster defeat, demotivate your sales reps, and increase employee churn.
3. Be Transparent About How Commissions are Calculated
Another thing you’ll want to do to streamline your commission management is to be clear about how commissions are paid.
Do insurance agents get paid when a customer signs the insurance contract or makes the first payment? Make it clear. Don’t leave your agents sales reps wondering when they’ll receive their payments.
A transparent sales incentive program instills trust among your reps. It motivates your producers to work hard to achieve their goals by eliminating the uncertainties surrounding payments. It reduces the number of payment-related queries, giving your sales reps the peace of mind they need to focus on marketing.
Is your commission program truly transparent? Ultimately, it comes down to two fundamental metrics.
- How many commission-related inquiries do you receive every month?
- How much time do your producers spend reviewing their commissions every month?
If it’s more time and inquiries than you thought, then it means your sales incentive program is not as transparent as it should be.
By making your commission program easier to understand and access, you can refocusre-focus your reps on the right priorities. Most importantly, you’ll be able to create a cohesive work environment with no distractions and where the priority is focus is 100% on sales goals and rewards.
But how do you create a transparent sales incentive program?
Transparent Calculations and Decision Making
Be transparent about the structure of your commission program.
To make your sales incentive program truly transparent, you must also explain the process used to set quotas and rewards. Be clear about how the percentages are calculated and explain the delivery of payouts.
No Preferential Treatment
Preferential treatment kills team morale.
If for any reason, some of your insurance brokers believe that others are receiving preferential treatment, they’ll start engaging in office politics rather than focusing on sales.
The solution to this problem is to address it before it impacts your sales team’s performance. You need to denounce the rumors and disclose all incentive plans and payment data that will prove the organization has no room for favoritism.
Commission management is critical for the success of any business, be it in the financial sector, manufacturing, or e-commerce.
Great commission management practices can instill trust among your insurance agentsreps and motivate them, ultimately leading to increased productivity and sales. Poor commission management, on the other hand, fosters defeat, demotivates your sales reps, and increases employee churn.
Any organization can streamline its commission management by automating the commission management process, setting the quota bar at the right place, and being transparent about how commissions are calculated.
Want a reliable system for commission tracking, payment, and processing? Get in touch with us today or request a demo. Designed with insurance sales teams in mind, Comissio is the only tool you need to streamline commission management.