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New Solutions to Agency Management and Commission Accounting Challenges

A recent study commissioned by Equisoft, shows that digital transformation in life insurance distribution is very much an ongoing process. Both carriers and agents are looking for more technological capability from distributors in order to make it easier to work with them‒and to improve the end consumer’s experience.

With digital first strategies we're seeing more and more that success depends on broker platforms that are cloud based, modular and interoperable in order to provide the ultimate customer with digital experiences. We're seeing things like digital signatures, virtual collaboration, mobile apps, all of these kinds of capabilities that make it really easy for our customers to connect with our distribution partners. At the same time, carriers also have to invest in the technology that integrates with AMS systems to make it easier for their broker and advisor partners to do business with them. In other words, giving them the easy button in the form of AMS system integration that builds loyalty because you're easy to do business with.

Three challenges faced by life insurance distributors

The report highlighted three areas of concern:

1. Data ownership and feed sharing

The perennial problem in life insurance distribution is, “who owns the data?” There is a tension between carriers and distribution partners that has been constant since the advent of digital. 40% of the carriers in this survey said that access to agency broker data about their books of business and their customers is a challenge. They’d like visibility into the sales processes to understand what’s being quoted, to whom and why.

On the other hand distribution partners want to retain control of the critical client information and the relationships themselves.

And then, between there’s the ongoing issue of analyzing and delivering data to advisors to help them be more effective in their interactions with end consumers. Here the critical element is that data and analytics are not just about generating information. Instead, advisors need to be able to identify the right data at the right time and translate it into actionable steps that meet their clients' needs. Data and analytics are critical for coaching agents and advisors on how to transition from selling to providing valuable advice.

Equipping producers and agents with data science tools is essential to help them provide the best advice to customers

2. Enhanced digital technology

Carriers are looking for more from their agent broker partners, particularly in three key areas. These capabilities are becoming increasingly important as the industry continues to evolve and adapt to changing consumer expectations.

  • Text Messaging: Carriers want brokers to be able to offer text messaging not only between underwriters and brokers but also between brokers and their customers. This capability is becoming more widespread, and carriers are eager to see brokers embrace it as a way to improve communication and streamline processes.
  • Online Appointment Setting: While some agencies claim to offer this capability, it's not always readily available on their websites. Carriers want to see more brokers embracing online appointment setting as a way to make it easier for customers to connect with them when they're ready to discuss their insurance needs.
  • A Strong Mobile Presence: Finally, carriers recognize that mobile devices are becoming the primary way that consumers access information and interact with businesses. As such, they're looking for brokers to have a strong mobile presence, including a mobile app that allows customers to connect with brokers when they're ready to talk. This is particularly important for younger generations, such as Gen Z, who value the ability to connect with a human agent when they need assistance.

3. Commission accounting

The study revealed several commission accounting issues, including a lack of transparency between carriers and brokers, as well as between brokers and their advisors. Additionally, many brokers lack efficient reconciliation tools and receive incomplete commission feeds.

The study shows that over a quarter of broker agents and advisors find carrier commission plans overly complex and challenging to monitor, which creates frustration and is not very motivational. In order to build trust and remain attractive to advisors it’s important to ensure that advisors receive timely payments for their work and are incentivized to deliver quality service. The use of technology is critical in order to increase transparency and provide visibility into payment schedules and potential delays.

How Tech Solutions Can Solve Commission Accounting Problems

Facilitate payments to advisors

One solution to commission accounting problems is to explore various ways of facilitating payments to advisors through tighter integrations with different banking systems. The rise of digital payment tools such as PayPal and instant money transfers has increased the need for digital tools to track and pay commissions.

In fact, 42% of carriers have acknowledged that they could do a better job of offering digital self-service tools that enable producers and advisers to track their commissions and make payments more transparent. This is especially important given that a quarter of survey respondents have integrated their AMS or standalone commission management systems to keep track of their payments.

How Tech Solutions Can Solve Commission Accounting Problems

With the prevalence of real-time payment options like Venmo, Zelle, and PayPal, many producers and advisors are experiencing fast and seamless payments outside of their work context. Whereas, the vast majority of commission payments take more than 10 days.

Increase commission payment accuracy

In order to increase commission calculation accuracy, focus should be placed on tackling the disparity between expectations and actual results. To improve the reconciliation process, a tight integration between the agency management system and the carrier's back-office system is needed, utilizing APIs to ensure frequent communication between the two. Real-time access to commission feeds and agency management system functionality which can handle complex commissions is crucial. It's also important to ensure that all of this information is available to advisors via the portal or through their brokers via phone.

Allow for real-time commission tracking

Transparency is just as important to resolving commission accounting issues and creating good advisor experiences as it is to create great customer experiences. Broker AMS and carrier PAS need to be linked by APIs so that commission feeds can be shared in real-time.

This information should be made available on advisor portals, enabling them to predict revenue accurately and monitor payment progress.

Solving Problems Effectively by Balancing Technology and Human Expertise

Not all the channel’s problems will be solved through new technology implementation. Any new initiatives should always be viewed the lens of the broker, agent or consumer who will use it.

We add tech when tech makes sense to add, not just because everybody's jumping on the bandwagon saying this is what we need to do.

Thomas Peterson, Vice-President, Peterson International Underwriters

All digital transformation efforts should be evaluated against an overall plan that fits the agency’s business plan. In each implementation the first question is always, what problem is it solving for? How does it move the transformation plan forward? And then, is the actual solution the right one for the advisors, staff, or consumers who will be using it?

It’s dangerous to focus too much on the technology being implemented and not put enough weight on the human side of digital transformation since the entire point of digitalization is to create better experiences for all stakeholders.

Conclusion:

Ultimately, the most successful carriers will be those that can leverage the strengths of both digital tools and human interaction to create a seamless and personalized experience for all stakeholders involved. Creating a digital transformation strategy that guides modernization implementations over the coming years will ensure that new projects contribute to the overall goal and have a higher likelihood of producing positive results in the near term.

For more insights on how new technology and partnerships can help advisors build digital capabilities and how to ensure agent engagement and retention, watch the webinar recording: A 360⁰ View of Life Insurance Distribution in 2023: New Solutions to Agency Management and Commission Accounting Challenges.

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