Insights

Don't let sales incentives crowd out important behaviors

Sales commissions and incentives are a major part of the sales culture in many industries, and insurance agencies are no different. Agencies have the customer experience in mind when they offer a variety of plans from a variety of carriers. But this enhancement of the customer experience is often neutralized by the incentive structures that carriers and the agency itself are offering their sales teams. At many agencies, we have seen the incentive structure inadvertently work against management’s intention, because an agent’s path to maximum compensation includes behaviors that are sub-optimal for both the customer and the agency.  It’s simple – people will do what they get paid to do.  Here are some key things to think about when creating an incentive to promote new customer growth.

Map out and Monitor.  While it may sound dramatic, think about what would happen if your agents focused 100% of their attention on new customer growth.  Would existing customers receive the same attention by your agents?  Would they be spending the time needed to fully vet the customer’s needs or would they be more focused on ‘how can I get you into this car today’?  Using data and analytics to monitor the metrics that could be compromised by this shift in focus (e.g., retention rate, underwriting cancel rate, cross sell rate, BI limits) can help you realize what those incentives are really costing you.

Balance and Be Creative.  By overlaying and ‘qualifying’ incentives, you can minimize unintended consequences.  For example, instead of giving $20 per new customer, qualify the sale by providing $10 for the customer now, and $10 after the first renewal.  A renewal incentive like this will shift behaviors in three ways. First, agents are motivated to ensure they write quality business the right way instead of ‘burning and turning’ the customer in front of them, resulting in higher-margin policies.  Second, the agent has an incentive to deliver an experience and service that will make the customer want to renew, increasing renewal sales. Third, the agent has an incentive to stay at the firm, decreasing regrettable attrition.

Create a Customer Culture.  It is important to create a ‘customer first’ culture in your organization.  One part of a customer-first culture is the consultative selling approach, where agents listen to the customer’s needs and find a solution that best fits those needs, rather than the solution that maximizes the agent’s compensation. How do your new-customer incentives impact consultative selling? Do they encourage consultative selling? Or do they discourage it? This question can be answered with qualitative and quantitative analyses that pull together financial data and consumer insights.

Incentives are a great tool to motivate agents and drive short term acquisition goals.  The key to ensuring that incentives don’t compromise other important objectives is being thoughtful in your approach to deploy them.  Keeping close tabs on metrics like underwriting cancel rate and retention rate will protect against unintended consequences from new customer incentives and will help your agents focus on the big picture.