Commissions Management 101: Tracking vs. Processing

Commissions Management 101: Tracking vs. Processing

Insurance Agency Commissions Software

In the last couple of decades, many insurance agencies have turned to technology to help them manage their commissions. Usually, this means they look to industry-specific agency management systems (AMS), customizable customer relationship management (CRM) software, or commission-specific software. Technologies like these make the job of tracking, processing, and managing commissions simpler.

If you’re in the market for new commissions technology, then there are a few things you should be aware of. Think of this as your high-level overview and intro into the world of commission management software.

The Basics: Tracking vs. Processing

First things first, you must understand that not all commissions management software is built alike. Some are more robust, some are geared towards certain industries, and some are solely for commissions. The sweet spot for most insurance agencies is a system that is both industry-specific and provides a robust commissions system.

As you search, you’ll likely come across these terms on a regular basis:

  • Commissions Tracking
  • Commissions Processing

For many systems, this is their way of letting you know that they have commission capabilities. However, tracking and processing are not one in the same. Let’s discuss.

Commissions Tracking

This will likely be the most common term you’ll run across. If the system is commission-capable, then it’s reasonable to assume that you’re able to track commissions.

For the most part, commissions tracking is the bare basics of commissions needs. It’s like a checklist ensuring that you indeed received the payment based upon the agreement with the carrier for that particular product. It tracks when policies go live, when the payment comes in from the carrier, and for how much the payment is.

The whole process is rather simplistic, but a good start for those dealing with commissions. However, a big problem with only tracking commissions is that agencies are never certain they’ve been paid what they’re due. They aren’t able to compare what they received against what they expected.

Bottom line: you do not want to solely rely on the carrier to always be right in the payments they issue.

Commissions Processing

A commissions processing system can track commissions plus a whole lot more. When we talk about commissions processing software, it’s referencing software that can do the following:

  • Track commission payments
  • Manage commissions—includes splitting and distributing payments and provide agent statements
  • Industry-specific reports—gain revenue insight, view top agents/top carriers, run reconciliation reports, etc.
  • Perform commission splits and have hierarchy established at the policy level
  • Ability to determine revenue type (overrides and bonuses) and split on each policy unique

Tracking commissions is one thing—checking it off as you were paid. Processing it is a whole other round. It ensures that you not only got paid, but provides you the flexibility to split those payments out to your other agents and the house. You’ll have a better understanding of what you’re missing and the outlook of your commissions overall because you have access to commission-specific analytics and reports.

Commission Management Systems

I can’t iterate enough how important it is to remember that not all commissions management systems are built the same.

When speaking to potential vendors, make sure to ask your rep if they can truly do all of the above and what those processes looks like. If you’re on a live demo, ask them to walk you through the processes so you get the jist of how it would work for your agency. If the vendor offers a free trial, then take them up on it! This is is your opportunity to get into the system on your own.

It’s important to ask about each individual feature to ensure the system can perform those necessary tasks and that it doesn’t require workarounds, additional customizations, etc. If it does require additional customizations, then be sure to ask the price for that.

Especially when it comes to generic CRMs, customizations can become costly quickly. They can also take a substantial amount of time. And, to add insult to injury, they’re not always upheld or supported when newer versions of the software are released—so bring that up as well. These are things you want to know before you invest any money.

Determining the System for You

Each insurance agency is unique and your needs will differ from others. To choose the system that will meet your needs, you must first determine your goals. Here are the five steps we’ve outlined for you to follow to choose the right system for you:

  1. Identify your goals
  2. Identify your needs
  3. Know your vendor
  4. Make a decision
  5. Manage the change in your agency

You can’t start the process of finding the right commission management system for your agency until you know where your agency is going (goals) and what it needs to get there (needs). Once you have those down pat, you need to make sure your vendor is the right match for you. This is where your questions come in.

Ask if the system can handle all those capabilities we talked about before. If it can’t, then is it on the horizon or the product roadmap? Or is there at least a feasible workaround you can do in the meantime? Take into consideration your goals and needs again. How important is it for you to have that feature and that ability?

During this time you can also ask for a client reference that had similar needs as you or came from the same previous solution. They use the software every day and will be able to answer your questions with an unbiased view. Ask them how they do x, y, or z for commissions and how the new system has impacted their day-to-day process.

Once you’ve explored your options, narrow the list down to 2-3 systems you think would fit best. Now, here’s where the tricky part comes in. Try not to fixate on price. Instead, focus on what resources the new system will save you.

Here are some questions you could ask yourself:

  • How many hours do you currently spend importing statements, setting up commission splits and hierarchies, or identifying missed and inaccurate commission payments?
  • How many hours could you save in each category by moving to the new system?
  • What does that equate to in dollars?
  • How does that savings relate on a monthly or yearly basis against the monthly or yearly cost of the new system?

So, if the new system saves you 10 hours a month and you pay your commission staff $20 an hour, the new system would save you $200 a month. If the system costs $100 a month, then you’re still saving an additional $100 in employee time since that employee now has the extra time to focus on other revenue-generating roles in the office.

Regardless of the system you choose, ensure that you do your due diligence and ask all your questions. If they’re commission-capable, then to what level can they help you manage, process, and track your commissions. You’ll want to know this beforehand so you don’t sink any money into a system that won’t truly fit your agency.

Essentially, you’re buying the software to help you simplify your commissions tracking and processing. The benefit of having a system is to save you time, thus saving you money—both of which allow you to focus on other aspects of your agency.

If your system isn’t meeting those needs or making your day-to-day more efficient and productive, then you may need to reconsider. Take the time and do a technological audit of your current solution; is it truly the best fit for your agency?

Managing Your Commissions with AgencyBloc

Learn how you can manage, track, analyze, and process your commissions to identify missed or inaccurate payments, forecast future revenue, and better understand your commission data with industry-specific reports and real-time graphs all within AgencyBloc's Commission Module.

Learn More

Allison Babberl

By Allison Babberl on April 3, 2018 in Commissions Processing

Allison is the Marketing Content Specialist at AgencyBloc. She creates educational content and designs videos to promote AgencyBloc's resources to help you organize, automate, and grow your insurance agency. Favorite quote: “Conversation is the bedrock of relationships. Without it, our relationships are devoid of substance.” -Maribeth Kuzmeski  More articles


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