Most independent insurance agencies have some type of incentive program for their staff. Most of these are based on sales. Typically there is some sort of bonus for cross-selling an additional line of coverage. There may be other bonuses associated with increasing coverage, selling a new policy or obtaining a referral.
I think these are all great programs and I love incentive plans that align with revenue generation. What I do not see as often is an incentive program that aligns with revenue retention. I believe there are two core reasons for this being the case. First, service staff is less inclined to be open to a compensation structure that is not 100% base salary. I’ve even had an account manager tell me that she doesn’t want to participate in the incentive program because the items are part of her job! The second reason is that it is simply not as easy to associate activities that are directly related to retention. We just need to get a little more creative here!
To address the first item we need a different approach to presenting the plan with the staff. When presenting a sales compensation plan, we need to be sure that we are focused on the potential total earnings including any base salary, commission payments, and bonus or incentive program. However, when presenting a service compensation plan, most service oriented people are going to focused on the base salary. The incentive plan should be there to entice them to go above and beyond in their activities.
This will not work with everyone. There are some people that are simply not motivated by money. In the example I gave above of the account manager that didn’t want to participate, I took the opportunity to explain that the incentive program was part of her compensation plan and it was a way for her manager to help her identify what should be a priority. Other account managers can be closer to a sales mentality and can be persuaded even further with financial gains. For this type of personality, you can work with them on a plan that may slightly lower their base but increase their potential earnings if they over perform.
It can be somewhat more difficult to identify the areas on which service incentive programs should be built. For sales, there is typically a direct tie to increased revenue. A new business is sold, more money comes in the door. There are a couple of areas where this works for service. Cross-selling and upselling are the two easiest areas where an account manager can contribute directly to revenue. The other area is your retention percentage. There are two ways you can approach this item in your compensation structure.
First, you can do a direct approach by assigning a bonus based on the retention percentage. The obvious positive in this approach is that your revenue is directly related to the payout. The drawback is that there are factors beyond the account manager’s control that can negatively (market changes, deaths, moves, businesses closing) or positively (hard market) affect this number. Additionally, often account managers have a harder time understanding how their activities affect this number so it can seem arbitrary. If they don’t understand it, they won’t buy into it. Therefore, they won’t make any positive contributions to increasing it.
Another approach is to reward based on activity. We know the areas that contribute to increased retention. Some of these are the activities that we see. For example, cancellations that left to go to another agency or direct writer (excluding deaths, people moving out of state or closing their business) could be tracked and have an incentive program built around as these are the clients that we can control losing.
Driving a positive customer experience is so key to our success that another way to build an incentive program is by scoring the customer experience. One simple (for the client as well as the agency) way to score this is by using Net Promoter Score (NPS). This scoring method is comprised by one simple question: “On a scale of zero to 10, with 10 being highest, what’s the likelihood that you would recommend our agency to a friend or colleague?”. This creates an environment where every component of the customer experience is viewed by the employees as a way to improve this score. This score takes into consideration more than just your account managers, but everyone that works in the agency. Positions such as receptionist or processor that typically don’t have a way to contribute to or take advantage of an incentive plan can now assist.
This leads us to the idea of a Team Incentive Plan. I strongly believe that there should be Individual Incentive Plans for service and sales people but that there should also be a team plan to which everyone contributes. Team bonuses are typically not cash related but usually focus on some type of team event so you are driving a positive reward for the team based on the team activities. These can be as simple as having a dress-down day or bringing in lunch to something off-hours like a dinner or sporting event.
Improving customer service is the focus of our AppX Customer Experience program. Contact us today to learn more. I’m very interested in any innovative incentive programs in place at agencies. If you’d like to share, please let us know in the comments!
