Blogs - Insurance Services Outsourcing
| How analytics helped a US insurer devise an agent compensation plan |
| By Rajesh Desingu on 11/16/2009 5:24:56 AM |
Insurance customers are increasingly buying their policies online due to convenience, less paperwork and faster response time. In fact, the 2009 comScore report, which asked auto insurance consumers how they obtained price quotes when they most recently shopped for auto insurance, found that online was the most commonly used channel by a wide margin.
According to the report, nearly two-thirds (63 percent) of respondents indicated they went online to obtain price quotes, followed by calling local insurance agents representing a single company (26 percent) and calling local agents representing multiple companies (25 percent).
This does not mean that an agent’s role has been eliminated. Quite to the contrary, it only becomes all the more critical. Agents now have to work that much harder to win new customers and retain existing ones. Agents are a key part of the sales function and as the Web changes the business landscape, there are implications for agent productivity as well as sales team-agent relationships.
To enhance agents’ productivity, a North American insurer reviewed its agent compensation plans. The existing system was based on growth and profitability for the current year. But was the plan effective in a market where online sales were on the increase?
The company was keen to obtain answers to the following questions:
- What actions should be taken to effectively cross sell and up sell?
- How best to determine the incentive and servicing needs of agents and brokers?
- Which agents, customers and products generated the best profitability?
The insurer had the option to use in-house resources to conduct this analysis but doing so would have resulted in additional workload and re-prioritization of business needs. So they decided to outsource the agency compensation analytics requirement.
The outsourcer deployed a range of techniques such as statistical forecasting, time series analysis, trend analysis and segmentation to analyze the company’s sales data. The new compensation plan calculates the present value of future cash flows attributed to the company-agent relationship.
As you would imagine, launching a new agency compensation plan can be met with much resistance, but by using this technique of calculating the present value of future cash flows, the insurer was able to demonstrate that the agents could make more money over time if certain business outcomes were met.
This is just one example of how analytics can help insurers better manage their agents and sales teams. |
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