Incomplete digital transformation creates commission accounting issues
The independent insurance channel is in mid-transition: from manual to automated, paper to digital, old and slow to agile and fast. And, the holy grail of this transformation is to create next level customer experiences that will exceed consumers heightened digital expectations.
The flip side of that evolution is to also revolutionize the insurance advisor experience.
‒Dan LaBert, President, NAILBA
And yet, we know that the channel is still some distance from achieving its modernization and CX goals. Policy approvals can take weeks. Transparency about the reasons why and how long it may take can be hard to come by. Legacy technology at both carriers and distributors presents challenges to accessing and communicating the data that would enhance agent experience. A lack of shared data in general‒from carrier policy feeds to commission feeds‒still presents issues.
New research reveals insights into agent frustrations
That’s why Equisoft partnered with Aite-Novarica Group to conduct research into how to improve the agents’ journey. This project really was born out of a need for us to try to understand the truth behind all the frustrations we were hearing and seeing in the independent insurance channel. We wanted to understand what the challenges were, as well as what was being done address those roadblocks. It gave us a good sense, through surveys and interviews, what carrier CIOs were thinking around policy onboarding and how they felt about wider issues around agency automation.
One of the areas of great concern that arose in the study, one that reflects what we hear in conversation with managing agents and advisors, is commission accounting.
The need to fix commission accounting
If you're looking at accelerated underwriting, you're looking at the customer journey. And if policy approval is taking a long time with poor transparency into why, the consumers start asking questions. Why is it taking so long? Should I look at a different carrier? Is this the norm?
But on the flip side, insurance advisors now need to be motivated to deal with those approval delays and issues, and shepherd their client through the process. The communication and relationship-building the advisor does with their client, and all spadework needed to remove roadblocks for the carrier make or break the client’s long-term impression of the insurer.
So, taking care of advisors is critical. Distributors need to understand what motivates them, what frustrates them. And, it turns out, one of the biggest issues is, they want to know what and when they’re being paid.
That’s why carriers are facing a huge demand from advisors and agencies for faster, more flexible compensation arrangements‒and increased transparency in the process.
‒Dan LaBert, President, NAILBA
Insurance advisors expect, as the industry evolves, that the way that they are compensated will evolve as well. The challenge for distributors is that, in many cases, they are not getting commission feeds from carriers. This means that back-office vendors, such as Equisoft, have had to develop their own tools to ingest data that's coming in from the carriers and provide agencies a view of what the expected commission payouts should be so they can reconcile commissions accurately and quickly.
Carriers sending distributors lump sum paper checks with no accompanying financial backup describing what policies were sold and how the commission breaks out to the advisors doesn't cut it anymore. Neither does manual entry, excel spreadsheets, and having to manually manage rate changes.
The solution to commission accounting challenges
‒Paul Legutko, Senior Principal , Aite-Novarica Group
Effectively, efficiently and accurately managing commission and payments processes requires a modern Agency Management System (AMS). These state-of-the-art systems can identify discrepancies between expected & received compensation and ensure the accuracy of carrier fees and commissions.
They can support all commission structures, and custom compensation types, meaning they can handle complex hierarchy structures to process payouts.
These systems are able to automate the commission reconciliation process from importing cash statements that contain instructions on how to divide lump sum payments, to transforming imported data according to the most current payment structure, and then, exporting summary reports in whatever format is required by the financial institution.
The best insurance distribution management software constantly updates the rates and products coming in from insurance carriers so there’s no need for distributors to manually track and adjust rates as they change. That makes the process hands-off for the Agency, meaning significant gains in efficiency and less user error.
And, within the Insurance distribution software, the distributor can process the commission and capture all of the required information—then actually make the commission payment directly.
The digital transformation of the independent insurance distribution channel is well underway. Digitalization of insurance distribution management software and process reforms will streamline operations and accelerate policy on-boarding. But an important early component of modernization success is leveraging new technology to enhance agent and client experiences. A foundational piece of improving advisor engagement is removing commission accounting unknowns and headaches. Providing transparency, accuracy and quick payment will motivate advisors and increase long-term satisfaction.