True Freedom Is a Rare Find for Insurance Producers

By December 30, 2018Blog, Insurance Producers

Financial Freedom

Most corporate agencies are similar in their compensation model development. They typically feature higher commissions for new business compared to renewals with limited stock and equity ownership options, noncompetes, and a lack of decision-making opportunities for the producer. This model prohibits your financial and career growth by limiting your incentives and increasing the pressure to acquire new clients.

Enhance Your Financial Freedom

Whether you are questioning if your success is limited due to your agency’s compensation structure or you’re trying to continue to grow in your career, consider the following elements that could hinder your future plans and how to address those concerns.

Noncompetes. Although noncompetes are understandable due to the protection they provide a business once invested in an employee, it could be the death of that employee’s career. Deloitte’s Shift Index found that 80 percent of survey participants are dissatisfied with their jobs. But your noncompete may hinder or severely limit your chance to find a better option. If you have the option, negotiate your compensation package and noncompete terms with your employer. If that doesn’t work, consider looking for a more suitable long-term opportunity.

Mergers & Acquisitions. Continued growth in the industry and increased M&A transactions over the years have created additional financial uncertainty for producers. If your firm is acquired or merged with another, your compensation could change and your commission percentages may be altered. Even more, new management could bring increased pressure to acquire new business and may move accounts around, so you may feel the pressure to drum up new clients and lose the relationships you’ve built with current clients.

Limiting Compensation Models. On average, independent P&C producers can generate income depending on their effort and time commitment. Not only do agencies traditionally avoid offering equity and stock options, but they may also cap your potential earnings. If you cannot renegotiate your contract, look for options at a producer-focused agency where your own efforts are the only determinant of your success. Find a place where you may even be able to out earn the CEO.

Finding an agency that cannot be easily bought by an investment or private equity firm means stability for insurance producers. It also means that commission stability is likely as well. If you have an entrepreneurial spirit, look for an agency or brokerage that provides an environment where the leadership celebrates that spirit. For example, a recent Hales Report made the observation that, of the 2018 Top 25 U.S. Agents and Brokers, Insurance Office of America (IOA) was one of only two independent agencies on the list that has “structural/business model impediments to being easily acquired.” For its producers and employees, that is a good thing.