Recently I wrote about the differences in compensation between personal lines and commercial lines producers. This generated some questions from a reader who was paying more (as a per cent of commission) to producers than the averages in the article. This made me think about all the agencies I know who are doing the same thing and tell me they have to.
The common thread in these agencies that are paying 50-70% of the commission to the “producer” is that the “producer” is what a Customer Service Representative does in faster growing, more profitable agencies. Which begs the question how should the tasks associated with selling and servicing insurance be divided?
What should the division of labor be?
In my view, supported by unanimity among the statistical evidence, producers in profitable growing agencies should produce. Period. They should be responsible for: prospecting, qualifying, presenting proposals and closing sales. They should not be responsible for: quoting, preparing proposals, binding, taking claims or any other service functions.
The objection to this is “I can’t afford to hire service people to do this”. If this is true then you are paying sales people too much!
In a well run, profitable insurance agency service salaries will consume 18-25% of income. This leaves 25-35% available to pay sales compensation. If “sales” people are paid 50-60% then, of course, there is no money to pay for service!
The problem with having “sales” people do “service” functions is you inevitably get mediocrity. Why? Because the type of people who excel at selling HATE the kinds of things that good “service” people must be good at: routine, detail, nurture, etc. On the other hand great “service” people love those things and abhor the tasks that great “sales” people enjoy: prospecting, creating relationships, convincing, closing, etc.
If you want to put your agency’s growth, and profitability, in overdrive then divide the tasks that must be done to attract and keep customers. Hire people who are great at service to service. Hire killers and hunters for sales. Divide the cost of these two functions as well. Pay producers to produce and servicers to service. It doesn’t cost any more to do it this way but is far, far more effective.