Unlocking Incentive Management Puzzle in the Insurance Sector

Overview

The insurance industry is known for its complexity, relying heavily on the efforts of sales teams to achieve both company objectives and individual goals. Incentive plans play a crucial role in motivating salespeople, yet maintaining consistent motivation on a daily basis poses a significant challenge. It can be attributed to just the magnitude of the business and various components that drive the incentive structure for insurance advisors. This blog delves into these nuances and the considerations an insurance organization must take into account while compensating their salesforce

Typical Incentive Components
in an Insurance Organization

Weighted Premium

Persistency

Policy Volume

Weighted Premium

Weighted First Year Premium (WFYP) in insurance typically refers to a method used to calculate commissions for insurance agents or brokers based on the premiums generated from new policies sold within the first year on a monthly, quarterly, half yearly or annual basis.

Orphaned policies" in insurance refer to insurance policies that are no longer actively managed or serviced by an insurance agent or broker.

Rewards or bonuses offered by insurance companies to In-house insurance advisors to attract new agents or brokers to

"Clawbacks" in insurance typically refer to the process by which an insurance company recovers previously paid commissions or bonuses from insurance agents or brokers for reasons like policy cancellations by the policyholder shortly after issuance, when premiums are not maintained, or when claims are later found to be fraudulent or improperly paid.

Persistency

Persistency in insurance, usually measured in the 13th or the 25th month since policy issuance refers to the extent to which policyholders retain their insurance policies over time, typically measured as the percentage of policies that remain in force relative to the total number of policies issued. It is a key metric used by insurance companies to incentivize insurance advisors as it helps improve the quality of business and maintain a stable and predictable revenue stream.

As an ever-evolving industry, insurance organizations keep on introducing new products. Additionally, mature products usually don’t need selling efforts. Eligibility is organizations considering only a set of products from an incentivization standpoint

Driven by seasonality, organizations choose to push specific products. To ensure meeting the objective a higher credit is applied on the premium so that advisors have that additional motivation to sell such products more than the conventional ones

It is the length of time policyholders continue to pay premiums for their insurance policies. This incentive encourages sales advisors to focus not only on making initial sales but also on fostering long-term relationships with clients and promoting policies with longer premium-paying terms.

Policy Volume

Policy volume directly impacts an insurance company's revenue. The more policies an insurer sells, the more premiums it collects, contributing to its overall financial health and profitability. Additionally, it helps spread financial risk of paying out claims among a broader base, reducing the impact of individual losses on the company.

Sales contests provide a structured and competitive environment that provides insurance agents and brokers to an opportunity to win prizes and garner recognition. This energizes sales teams, boost morale, and inspire them to put in extra effort to achieve their goals.

FYC refers to the commission earned by insurance agents or brokers for selling an insurance policy during its first year of coverage and are typically higher than renewal commissions, as they compensate the agent or broker for the time and effort involved in acquiring a new customer

A specified period of time after purchasing the policy during which policyholder has the flexibility to decide whether to keep or cancel the policy without a penalty. Incentives are paid only upon continuation after the free look period

Conclusion

In summary, the insurance industry’s complexity necessitates effective incentive management strategies to motivate sales team and drive performance. Incentivate helps you simplify processes, foster transparency, improve GTM of contests/campaigns and empowers salespeople with tools they need to succeed

Frequently asked questions

What is insurance?

What are the Common Data Sources Integrated in the Insurance industry?

What are the Typical Components in an Insurance Incentive Plan?

Typical Components in an Insurance Sales Contest / Bonanza

What is the processing and payout frequency in the insurance industry?

What are the challenges that should addressed in the insurance industry?