Although insurers are beginning to use enterprise incentive management systems, they have yet to take advantage of the technology's broader potential, according to Chad Hersh, senior analyst at Boston-based Celent Communications. Most insurers are using EIM tactically-to manage producer compensation more efficiently, he says. "But insurers won't see the true value of EIM until they use it strategically," he says. "Otherwise, it just fixes a broken system."Strategic uses of EIM include managing individual producer profitability as well as distribution channel profitability, according to Hersh.
"These systems enable insurers to drill down right to the producer level to manage a channel more effectively," he says. "You can reward your best producers, and you can adjust your relationship with the ones that aren't as profitable," he says.
Penn Mutual Life Insurance Co. is an excellent example a life insurance company that is implementing enterprise incentive management for the broader strategic goal of managing its producer profitability, he adds.
"Once Penn Mutual's system is fully implemented, the company will be able to look at a producer six months into his appointment with the company and say, 'This is or isn't someone we want to spend a lot of money training or marketing to,'" Hersh notes.
EIM can also measure profitability by distribution channel. An insurer can look at a brokerage channel, for example, to determine if it is performing the way it appears to be performing according to its profit and loss statement-or did the company just have a couple of big individual sales to a large wealth management client," he says.
Because compensation analysts can more easily tweak incentives using EIM versus legacy compensation systems, insurers can more quickly change those incentives to meet market conditions. "An insurer can heavily (push) a new product to the market, and taper that off over time," Hersh says. "In the legacy system, that can be extremely difficult because they have to do a lot of re-coding."
What's more, an EIM system can improve accuracy and provide more timely compensation information to producers, according to sources.
Some companies may be underpaying or overpaying their sales representatives, and that can be painful, notes Jim Lazarz, vice president of field compensation at CUNA Mutual Group, a Madison, Wis.-based financial services firm that implemented an EIM system last year. "People in the field may be coming to you saying, 'You're paying me wrong; prove to me that you're paying me right.'"
To minimize those kinds of inquiries, Penn Mutual's EIM system, once fully deployed, will enable the company to provide its producers more detailed statements along with their checks.
"They'll be getting checks and statements simultaneously and they will know the specific policies they're being paid for," says Neeta Garg, assistant vice president, sales business information at the Horsham, Pa.-based insurance company. "The information we will be able to provide them will be so much more detailed than in the past. So, fewer questions, fewer phone calls, and hopefully more satisfaction."
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