Most business majors would have heard about Franklin Covey’s The Speed of Trust. In his book, Covey explores the economics of trust in an organization, saying that trust will impact both cost and speed. One of the biggest trust risks for today’s insurance agency lies in the complex business of commission calculations. Finding ways to restore confidence in the process must be a priority for organizations looking to create a sustainable and profitable business.
Covey’s position that “When trust goes down, speed goes down and cost goes up. When trust goes up, speed goes up and cost goes down,” is something most managers and team leads can easily confirm. However, not many insurance agency leaders will have this top of mind when it comes to the monthly commission calculations.
Many of the challenges related to commissions stem from their complexity. Agents will deal with multiple carriers during the year, each one offering different commission structures. The commission payments are then divided between the agency and the producer. These payments also include other variables such as the type of policy, the policy period, and specific terms. To make things worse, there are very few systems that can deal with the commission hierarchy between different carriers, agencies, and intermediaries, leaving much of the calculation up to admin teams within agencies.
And it’s here that the problems creep in. Since so much of their earnings are reliant on commissions, agents are understandably very invested in their calculations and will manually calculate their commission each month. Unfortunately, human error – either with the admin team in charge of doing the calculating, or with the agents themselves – can result in inaccuracies. In fact, some industry leaders have suggested agency books can be off by up to 30%.
In an environment where mistakes are costing agents a good deal of their earnings, it’s not surprising that trust is the first casualty. However, the impact of this goes far beyond just an unhappy work environment.
Franklin Covey's assertion that trust has a direct impact on organizational performance is experienced firsthand by today’s insurance leaders. When agents don’t trust the calculation of their commissions, they spend a good deal of their time and focus redoing the calculations and debating the results. This diverts their time and attention, costing the company in lost productivity and sales. Their dissatisfaction can result in them quitting the company, which in turn costs the organization in recruitment costs. Not to mention the book of business with which the agent walks away.
The Harvard Business Review published findings from neuroscientist, Paul J. Zak, which demonstrated the importance of trust. Zak found that when compared with people at companies where trust was low, people at high-trust companies reported: 74% less stress, 50% higher productivity, 13% fewer sick days and 40% less burnout – a common complaint amongst insurance agents. In addition, working in a trusted environment led to 106% more energy at work, and 76% more engagement, with 29% reporting more satisfaction with their lives.
The results clearly show that building a trusted environment impacts the bottom line in every respect and that finding a solution to the commission problem is worth the time and effort.
The solution to the problem lies in removing uncertainty by minimizing human interventions and ensuring accuracy.
The Synatic solution goes directly to the source of information and automates the commission calculation process from end to end. By pulling down the Direct Bill Commission statements directly from the carriers, the Data Integration Hub saves agency staff valuable time and resources, allowing them to focus on their primary roles.
Agencies using the Direct Bill Commission statement calculator (or DBC) can boost their teams’ confidence in the commission process as a whole. This, in turn, helps cultivate a culture of trust within the organization where agents can rather focus on delivering excellent service to their clients.
More than just reducing the mistrust, the solution's accurate calculation often results in agents taking home more money at the end of each month, further boosting their overall satisfaction. What’s more, the efficiency of automating the process means less human oversight and, in many instances, fewer administrative resources and lower operational costs.
Finally, when looking for proactive interventions when it comes to restoring the trust due to the poor commissioning process, one of the biggest wins will come through transparency. By introducing an auditable, open and transparent process, business leaders have the chance to inject sunlight into their organizational processes, and with it a new culture of trust.
