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3 minute read
Recruiting and retaining top-performing agents will naturally lead to revenue growth. When it comes to health insurance distribution, the challenge, however, is identifying top-performing agents. It’s not as simple as just looking at sales numbers. Taking a deeper dive into what drives agent performance requires access to data that needs to be standardized and analyzed. And that has typically been difficult for carriers and their downlines.
The Impact of Understanding Agent Performance
The insurance industry understands how much agent performance can influence FMO and carrier performance. In research conducted by Highpoint Associates, one FMO said, "The variance in agent productivity across the agent force is tremendous. The best agents have much higher closing rates, often less time to close, and an ability to cross-sell… Having the best agents changes your unit economics from very unprofitable to very, very profitable.”
Despite the importance, there’s not an easy way to do this. According to one regional carrier, “Currently there is not a good system to identify and recruit the best brokers. As an industry, we haven’t found a good system yet to accomplish this. Cracking this nut would be invaluable to business performance improvement.”
Lifetime Value, Customer Acquisition Cost, and Policy Persistence
While sales may seem like a straightforward metric in the insurance industry, it’s not the only indicator of performance. For example, customer churn can be as big a factor as the initial sale. Agents who push customers into any policy for a quick sale rather than evaluating their needs and finding a policy that meets their long-term needs might not be the best agents. New policy sales don’t always reflect policy persistence, lifetime value (LTV), or customer acquisition cost (CAC).
Ultimately, carriers, FMOs, and agencies want to optimize the LTV of a customer at the lowest possible cost. This makes policy retention a critical factor in optimizing financial performance, but one that can be difficult to standardize, measure, and analyze across agents.
Agents typically earn higher commissions on new policies than renewals. While an average agent naturally wants to retain customers, higher-performing ones are more likely to have the expertise and motivation to match a customer to a policy that will lead to higher persistence. This increases LTV while decreasing CAC for carriers and distributors, but it starts with the agent recommending the right plan. Motivating and rewarding this type of agent behavior requires a level of data transparency and accuracy that is difficult for many carriers.
Data Transparency Creates Lead Optimization
According to one national carrier, there “can be very significant benefits to fixing this if you can aggregate all of the data, standardize it, and develop the inference engine to the point where you’re picking up a high signal-to-noise ratio from the data to pinpoint agent issues, problems, and opportunities.”
Without accurate data that tells the full story around agent performance, a carrier or downline can inadvertently send strong leads to agents who appear to sell well, but could have lower persistency rates and LTV. The industry is recognizing the opportunity to harness data and artificial intelligence to improve lead optimization strategies. When you have the insights to match the right leads to the right agents, not only can you increase sales, but also policy retention and LTV.
As one FMO explains, “If you can start to drive production through your best agents, send the best leads to them, feed them more qualified leads using data science, with insight on the best approach to client acquisition, that would be massive. And then it’s just a continuous repeating cycle. Our topline would increase by double digits if we were able to deploy this analytic strategy using business intelligence tools.”
How Commission Management Provides Data Transparency
The rewards for data transparency to maximize agent performance are clear. But getting accurate, transparent data is much easier said than done. The health insurance industry faces multiple data challenges including:
- Lack of Standardization: Data definitions, file formats, transmission protocols, and commission tracking methods vary across the distribution chain.
- Poor Integration: Different players lack sufficient connectivity between legacy systems.
- Manual Processes: Lack of automation, non-standardization, and erroneous data forces workarounds and time-consuming reconciliations.
A modern, flexible commission management system is the start to solving many of these challenges to ensure that carriers, FMOs, and agencies can access the data necessary to truly understand agent performance. And since they can all see the same data, there is increased transparency and trust throughout the entire insurance distribution value chain, starting with carriers and their downline partners, down to the agent level.
With standardized data and integrated data feeds between organizations, carriers and downlines are able to truly understand persistency, CAC and LTV. These strategic insights can lead to optimized lead-matching models which further enhance the performance of top-performing agents.
Driving Growth and Profitability Starts with Data
Carriers and FMOs need to identify, attract, and retain top-performing agents to maximize growth. Understanding who the top performers are starts with standardized, accurate data. See how e123 Commissions for Carriers increases transparency and trust by solving for data challenges. Learn more.
