Most people know that insurance agents work off commission. That means they get a specific percentage of the sales they make, which comes from the premiums the clients pay. However, there are different insurance agent compensation models, some good and others not so good.

If you own an insurance agency, selecting the right model isn’t a quick or straightforward decision. For this, you need to consider all the information provided. Then you can set up the appropriate compensation model for your agency.

Types of Commission Models

For the insurance industry, agents get paid commission or a percentage of the premiums for the policies they sell. There are three primary compensation models that agencies follow. These include Residual, Upfront, and Renewal:

Residual

Residual commission payments connect directly to premium payments. That means, at the time an agent closes a deal, they get paid a percentage. However, they receive a further commission whenever the client renews the policy, albeit at a lower percentage rate. Although not always, residual commission payments are the most common for automobile and health insurance policies.

Upfront

Upfront insurance commission payments are quite different. Typically, they’re associated with life insurance, including whole life and annuities. On average, an agent earns 10 percent of the premium purchase, although that can go much higher.

In this case, an insurance agency owner determines the amount of the payment the agency keeps versus what’s passed on to the agent. For larger agencies, the payments often get split between several management tiers. The greatest benefit of upfront commission is that it encourages agents to work even harder to sell policies.

Renewals

Just as the name applies, the renewal compensation model means that agents receive a percentage whenever a client renews a policy. However, this is usually only 2 to 5 percent of the premium. While it’s not a significant amount of money, an agent with many renewals or renewals of high-priced policies can earn quite a bit more.

Defining Factors

However, the way that insurance agents get paid also depends on several factors, including the type of insurance sold.

Life Insurance

Long-term insurance policies, including life, typically last a minimum of 10 years. Therefore, agents earn a healthy upfront commission. Usually, new policies equate to 40 percent on the first year’s premium. Then for renewals, the percentage drops significantly.

It’s important to note that state laws regulate insurance agencies. For that reason, rules vary from one state to another. Also, many states limit the number of policy renewals an agent can earn commission on. In some instances, commissions stop once a policy hits its 10-year mark from the date of sale.

For life products, different commission structures exist.

• Heaped – This is the common choice for agencies that sell individual life insurance. As stated, an agent makes the highest commission from selling the initial policy and less for renewals.
• Level – With this, an agent earns the same commission for both first-year and renewal periods. Typically, this is for group life insurance policies.
• Levelized – An agent makes a higher commission on the first-year premiums and less on renewals for group life products. However, the difference with this structure compared to the heaped structure is that the percent for renewals is higher.

Health Insurance

The compensation model for health insurance is similar to long-term (life) policies. So, an agent will make the highest commission after selling a policy and then a lower commission upon each renewal. The primary difference is that most health insurance policies expire in about three years.

Property & Casualty Insurance

For casualty, automobile, home, and other property insurance, policies don’t last nearly as long as the other two mentioned. For that reason, the commission model consists of a much lower percentage. Generally, this ranges between 5 and 20 percent, again with renewals even less.

Additional Variables

Along with the type of insurance are more variables that determine how much commission an insurance agent makes.

• Client Support – This includes the support an agent provides to a client when selling the first policy and after. Excellent support entails building relationships with clients, keeping in touch, providing them with options for new coverage or saving money, and so on.

• Lead Generation – If an agent generates all their leads, they’ll often earn a relatively high commission. However, if an agency implements a software program that helps generate leads, the commission might drop somewhat.
• Marketing Strategies – In some instances, an agency will invest in a tool that improves overall marketing efforts. That could be an innovative software program or a professionally designed insurance agency website. Just as with lead generation, this can cause an agent’s commission to drop. However, it also opens the door for building a stronger client base, which equates to more business and, therefore, more commission.
• Partnerships – If two agents tackle one client as a team, they will split the commission. Although this isn’t overly common, it does happen, especially when targeting a large client.

Choosing the Best Model for Your Agency

Now, you need to decide on the right compensation model for your insurance agency. You want to attract talent by offering agents an excellent way to earn a top commission. You also want to keep great agents by doing the same thing. So, the model you select can play a big role in the success of your business.

Take time to understand and analyze the different compensation models, types of insurance, and the various factors mentioned. That will help you choose the best option for your agency and agents.

Poor morale can occur for several reasons. It also manifests in ways that cause problems for the insurance agency. While every agency faces challenges, low morale within an office is near the top of the list. Without a doubt, this applies to any business, including insurance.

Causes of Poor Office Morale

For anyone who owns or manages an insurance agency, it’s important to understand the different things that lead to low morale. That makes it easier to spot potential problems early on, which helps remedy situations before they spiral out of control. Here are the top reasons why low office morale may occur:

• Lack of communication
• Poor or inadequate instructions
• Little to no trust
• Dishonest practices
• Unrealistic expectations
• Micromanagement
• Lack of appreciation
• Poor staff bonding
• No leadership accountability
• Inadequate or ineffective training
• Disrespect (especially coming from owners or managers toward agents and staff)
• Poor management
• Disorganization

Without a good leadership team and a strategic plan to run an agency, this is what happens. The threat of low office morale is that it’s contagious. Simply put, if just one or two people begin to feel unappreciated, disrespected, or taken advantage of, it won’t be long before others feel the same way.

Consider disorganization. Running around frantically trying to get information on a particular client is incredibly frustrating. For this and many of the other causes of low morale, there’s a simple solution. Implementing an insurance agency management system helps streamline operations and makes everyone’s job much easier. Most importantly, higher morale enhances the client’s experience.

The Fallout of Low Office Morale

Just one of the above mentioned issues is enough to create unnecessary chaos in an insurance agency. Below are just a few examples of the effect of low morale.

• Agents and staff stop communicating effectively
• Absenteeism increases
• Production and quality of work decreases
• Client complaints roll in
• Damaged reputation
• Loss of revenues

Proven Ways to Boost Low Office Morale

The good news, there are many ways to boost morale. By choosing the right solutions and implementing them correctly, things typically turn around fast. Using five of the causes listed as examples, here are solutions that insurance agency owners and managers should seriously consider.

Lack of Communication

It’s a bad sign whenever people working for the same agency stop talking. Keep in mind that communication is not just oral but also written. There are two great options to fix this. However, this requires an owner or manager to set the tone so that everyone knows they can and should communicate.

First, it’s important to have regular staff meetings. This provides a platform for agents and staff to discuss concerns, as well as achievements, openly. It also puts people in the same location (whether physically or virtually), which encourages better communication.

Second, implement an insurance agency management system, as previously stated. This gives everyone quick and easy access to the same information. It also prevents disorganization. For instance, say an unhappy client calls with a question. With this system, the person answering the phone can identify their agent and connect the call within seconds.

Poor or Inadequate Instructions

For an insurance agency to run seamlessly, everyone must be on the same page. When bringing agents or support staff on board, they should receive an “employee” manual that outlines job descriptions, processes, policies, and so on. A insurance agency management system to manage an agency also helps since it serves as a reference point.

Micromanagement

Without question, one of the most frustrating things for any office worker is to have someone micromanage them. After providing agents and staff with proper training and the tools needed to do their jobs, a leadership team needs to step back and trust them to perform.

However, when micromanaged, several things happen. For starters, having someone constantly watching and asking questions becomes incredibly frustrating. That can make it difficult to focus. As a result, an individual begins to make more and more mistakes. With all that combined, they could start to feel resentment, which clients pick up on.

On the list of the things that cause low office morale is improper or inadequate training. That kind of goes hand in hand with micromanagement. Thus, if an insurance agency provides the right training and tools, there’s no need to micromanage.

Another way to fix this is to give agents and staff different opportunities to grow. One example is podcasts hosted by insurance industry experts. That way, agents and staff members can learn new things while honing the talent they currently possess.

Disrespect

There’s no place for disrespect in any business – especially insurance. This is especially true if it comes from a manager toward an agent or staff member. For this, insurance agency owners need to make sure they have the right leadership in place. Great managers are also mentors, supporters, and team players.

They also have positive attitudes and open-door policies. It’s not that they’re superior, just trained or educated more and held to a higher standard.

If someone within management shows disrespect, perhaps it’s time for some house cleaning. It’s amazing how one person can set the tone and pace for everyone within an agency, good and bad.

However, great managers also know how to balance discipline with praise. In other words, if they need to address an issue with an agent or staff member, they do so to yield positive results. Rather than judge or make a person feel uncomfortable, they work together to find a viable solution.

Lack of Appreciation

Look, everyone needs kudos from time to time. That doesn’t mean an insurance agency owner or manager has to go around patting everyone on the back every hour. Yet, they need to acknowledge when they see improvement, effort, and achievement.

For instance, an agency has a professional website designed and developed. If the agent or staff member who oversees the site does a great job of keeping information current, useful, and enticing, they deserve acclimation.

Boost Office Morale to Achieve Greater Business Success

The bottom line is recognizing low office morale quickly, followed by taking the appropriate action, will go a long way to achieving a higher level of success. Among all the different solutions, it’s vital to have an easy-to-use yet robust insurance agency management system in place.