What Are Life & Health Insurance Agencies Using to Process and Track Commissions?

By Kelsey Rosauer on March 4, 2016 in Commissions Processing

How does your agency process commissions?

Commissions processing—yuck.

The world of insurance commissions is an ever-changing, often confusing one. It’s no wonder that we hear from agencies how much they despise processing or reconciling commissions each pay period. For one broker agency, it was a 48-hour process of flipping through papers and writing checks each month before they switched to an agency management system (AgencyBloc). Let’s take a look at how agencies are currently processing and tracking commissions.

How agencies are tracking commissions:

  • They aren’t. Unfortunately, some agencies still aren’t tracking their commissions. They’re receiving carrier payments and paying the necessary agents, but they can’t be sure any of it is accurate without tracking. This is usually only the case for smaller agencies or one to two-man operations that don’t have complicated commission splits.
  • Using Excel spreadsheets. Using Excel to process and track commissions requires you to have a person dedicated to maintaining the organization of the sheet and ensuring accuracy in the calculations. Using Excel is a line-by-line tactic that takes time—though Excel is very powerful, it isn’t always straightforward. Not to mention, the way carriers are paying commissions are constantly changing. It’s easy to understand why some agencies are willing to pay freelancers to create these types of sheets for them.
  • Using a third-party commissions tool. If an agency is already using a generic CRM without commissions processing capabilities, they’ll have to find an external resource that (hopefully) integrates with their CRM. Some agencies are using third-party commissions processing tools to fill the gap where their generic CRM can’t perform. However, these third-party solutions can be expensive and time-consuming.
  • Using an industry-specific agency management system (AMS). This is the best case scenario for an agency. You have all of your information—individuals, groups, agents, policies, carriers AND commissions data—all in one system. When it’s in one central location, it can all work together requiring you to do less manually. For example, within AgencyBloc, you’d have rate tables set up that show it how to calculate your agency’s splits. You’d tie those rate tables to the associated policies, which are tied to agents. Once you have it set up, the work is done for you, saving you serious time and resources. Not to mention, any changes to rates are much easier to update in the system vs. flipping through papers or a complicated Excel spreadsheet.

All of the above (except #1, of course) require effort. So, why do agencies even do it? Why not just take the carrier statements as they are, write the checks and forget about tracking?

Why should agencies track commissions?

Even if you’re a small agency, there are benefits to tracking your commissions. Those include: finding missed commissions, ensuring accuracy and overall budgeting.

Finding Missed Commissions

Though it’s unintentional, carriers can and do miss commission payments for several reasons. A couple examples are:

  • They’re 2-3 months behind on their payments, so it’ll appear in your books that you haven’t gotten paid yet. Most agencies don’t worry for the first few months, but if you’re tracking it closely, you’ll know when you might have a deeper problem.
  • One of your clients canceled his/her policy and didn’t notify your agency. That will appear to you as a “missed” payment from the carrier and will cause you to investigate the situation.

So, how does tracking commissions allow you to find missed commissions? You’ll have to be using an AMS with this reporting capability to do it easily, but some agencies have found tens of thousands of dollars in missed commissions within their first year of using AgencyBloc. Without going into too much detail of the calculations, AgencyBloc will look for commission payments not received by statement date or by bill from date. Bottom line: if you aren’t tracking commissions at all, it’s less likely you’ll catch missed commissions.

Ensuring Accuracy

Just like missed commissions, mistakes can be made. When you’re processing or reconciling commissions in an AMS with rates tied to policies and your splits set up with your agents, you have a model to compare your carrier statements against. It immediately makes it easier to see what you should be receiving from the carrier and paying out to agents, allowing you to catch any mistakes made and fix them quickly.

Budgeting & Financial Planning

Budgeting and financially planning for future events is crucial for any business. In the insurance industry, this is done via projecting commissions. Within some agency management systems, agencies have the ability to projection commissions and continuously monitor their actual commissions coming in vs. project commissions. Financial monitoring like this is important for any agency looking to grow. If you’re looking for a good resource to get started on budgeting and financial planning for your agency, check out Agency Brokerage Consultants’ presentation, “Best Practices for Growing an Insurance Agency.” And if you’re in the market for a new AMS to help you project commissions, AgencyBloc can handle that for you.

What can your agency do to be better at tracking commissions?

Processing and tracking commissions is no small feat. The best way to figure out how your agency can best handle this is to take into account your business size and the staff you have available to help. The four ways to track commissions pointed out above can be indicative of the agency’s size, but it can be indicative of an agency’s goals. If one of your business goals is to grow and be strategic in your business decisions, you’ll want to look at a comprehensive system, like an AMS, to process and track commissions.

AgencyBloc Agency Management System

Kelsey Rosauer
Kelsey Rosauer

Kelsey is the Marketing Brand Specialist at AgencyBloc. She plans and creates educational resources to help our customers organize, automate & grow their insurance agency. Favorite quote: "I am convinced that life is 10% what happens to me and 90% how I react to it." —Charles R. Swindoll  More articles

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