How to use Relationship Data to terminate the Insurance Commission Clawbacks

This post is part of a series of sponsored by Agent Sync.

The strength of an insurance partner is about more than good Vibber – it’s about the money. A strong partnership delivers real bottom line value for both parties; A weak often feels like a one -way street.

For insurance companies and agencies in the distribution chain, the state comes for your distribution channel management in sharp focus when it is commission. Many accounting departments fall on each side of a better secure end-sorry divide. To the left we have the people who would rather pay their partners faster, who understand that the speed of control contributes to the relationship with the relationship. These insurance companies risk paying inappropriate commissions, facing state insurance regulators, or having to cross the commission clawbacks. To the right are the people who play it safely and hold their commissions in “pending” or “held” status until they have thoroughly monitored that the agent was licensed and appointed at all times of the sales cycle. These companies that follow the rules have a different risk. By delaying payments, they can raise their distributors anger or even break the Department of Labor Wages Payment Rules.

The complex insurance commission hierarchy structure

Commission accuracy is complicated due to the different differences between relationships with the carrier and agent. A single agent may have multiple ways to get a commission from a carrier, with different lines of business or agency structures that sit between them, all influenced by:

• Product -specific commissions
• Relationships between agencies and other business units such as a Financial Marketing Organization (FMO), Insurance Marketing Organization (IMO), National Marketing Organization (NMO), Brokerage General Agent or Agency (MGA) or Managing General Underwriter (MGU)
• Agent-to-Agent relationships such as uplines and downlines, brokers vs. captivity funds, referrals and W-2 or 1099 employees
• Geographical and regional factors

Where the current ICM methods come to a short

Many incentive compensation management methods (ICM) methods face the same problems that are endemic to other older insurance infrastructure: they are manual, labor -intensive, slow and prone to human error. This means unanswered payments or clawbacks, and overall business risk.

• Older systems Include everything from pen and paper to several (typically dated) technology systems. Even when there is any “modern technology” involved, systems are not connected to each other and leave the staff to spend time checking and crossing the reference of information.
• Shadow Accounting happens when a story of older systems and human errors causes agencies and agents to doubt that they are being paid properly and beginning to do their own math. This works as well as you could expect. Instead of focusing on sales, insurance agents and insurance agency leaders spend time calculating their compensation and comparing it to their paychecks.
• Revisions and observations May be more necessary and frequent if in your distribution channel they often wonder if they are receiving the right commission. Not only are these revisions even time -consuming, but if you work with older systems, TimeSuck is time when people work to collect the information for a revision from several, different sources.
• Trust vacuum derives from wrong or slow commissions. Payment errors or delays ultimately erode your working conditions and reputation.

Digital ICM upgrades alone are not enough

It’s easy to see the problem of managing this complexity by hand, with Ashley and Jim desperately trying to keep all the data current on a spreadsheet (or, let’s be honest, a large number of different spreadsheets, web browser tabs and PDF documents). Using a digital ICM solution to enforce payment structures and state regulations is a solid first step in the solution for accurate commissions. At AgentSync, we happen to be integrated with several ICMs that do just that. But an ICM alone is not enough. Without a way of connecting these different relationships to a consolidated and reactive Hierarchical structure, then each change of a relationship can have a cascading effect on the calculation of commissions for each downstream person or unit. This means that your commissions could be delayed or wrong if:

• A carrier updates the compensation structure, contract or product offering for downstream agents
• An agent moves agencies, adding or falling an appointment, moving states or being promoted
• An agency is part of a merger or acquisition, changes the designated responsible licensed person (DRLP), expand states or add or fall a bearing relationship

If you do not have a way of reflecting accurate hierarchies in your commissions payment system, each of these changes can put a whack-a-mole effort to update each place you store data.

Risks of poor distribution channel management when it comes to commissions

One of the worst risks of automating everything on a “put it and forget about the” way without accurate hierarchies is that someone gets a commission while in the middle of a violation of compliance.

Whether it is an agency whose designated responsible licensed persons (DRLP) have let their licensing renewal lapse (often negate the validity of the licenses of any agent who sells under them), or an individual agent who has not stopped at child’s contribution payments, but is an upline for 20 other agents, these things happen! But they present a legal, financial and reputation damage to your business.

How Agent Sync Hierarchy Management stops money from ruining your relationships

Imagine a world where one of your agency partners sells a branch and changes commissions and hierarchical conditions for 200 agents. This data Firedrill is a regular event for the carriers and agencies who have high-M&A partners. And it is a situation that is ripe for the commission clawbacks.

Now imagine that it will take your team 10 minutes or less to update this new information in your system. Imagine that once the team changes the single structure of your core system, this information automatically syncs up and down the other affected agent and agency registers and since you have integrated your distribution channel management system data with your ICM, you are finished. That’s exactly. No other crank, changes, spreadsheet mixing or action needed.

That’s the power of Agent Sync Hierarchy Management. It’s not about “doing more with less” it’s all about Doing less while Gets more.

It is more than a nice one to have to reflect the complex network of insurance relationships. It almost means removing inaccurate commissions, drastically lowering your risk and having an audit ready computer science that saves you time and money.

To learn more about how to control hierarchies may well raise your commission management, check our page or plan a personal consultation.

Topics
Data driven