The insurance industry is currently facing numerous complex challenges obliging it to make adjustments to compensation models and systems. In addition to low-interest rates, changes in customer needs, and digitalization, it is primarily the various regulatory requirements that are forcing insurers to act – such as the IDD with its obligation to avoid conflicts of interest. What this means: The commission agreements and bonus payments that have characterized sales compensation for decades now have to be scrutinized. When structuring compensation, it is important to take into account that compensation models need to remain attractive for both current and new sales staff while also supporting the attainment of strategic business objectives.
Another hurdle consists of the compensation systems already in place. These IT systems are frequently still host-based and represent the dinosaurs in the IT architectural landscape of many insurers. They have usually reached their end-of-life cycle and do not offer a sufficient level of flexibility to implement innovative compensation models for motivated and fairly-remunerated sales professionals.
Accordingly, there are three important fields here for insurers to take action in: auditing regulatory conformity in existing components structures; developing new, future-oriented remuneration models; and selecting new, progressive remuneration systems.
The first step should be a multi-stage procedure to analyze where current compensation models need to be modified to align with regulatory requirements. An in-depth look should be taken to assess the impact of the identified points. This analysis will provide a comprehensive picture on the necessary adjustments and their consequences. This is also intended to clarify the question of what kind of adjustments need to be made to an existing compensation model. Can the model be improved through evolution, or is a revolution required to create a new compensation concept?
A trend can be seen on the market in which companies are shifting from product orientation to customer orientation. What does this mean for the insurance industry, and specifically for agent compensation? There are usually only marginal differences from provider to provider when it comes to simple products like household and personal liability insurance. Additionally, in light of their relatively simple structure, they can be sold with negligible consulting expenditure online, where customer demand is also seen. However, the affinity for online interaction changes when it comes to claims: While the focus at the time of contract conclusion is less on receiving a personal experience or consulting and more on the policy itself, personal service is indeed expected in the event of a claim.
That leads to the question of how new compensation models can be developed for agents that are reflective of the service being provided and also support a company’s omni channel strategy. Simultaneously, however, they’ll also need to provide a response to “hybrid customers,” whose purchasing behavior changes according to the situation.
With a wealth of market and industry expertise and the aid of the Q_PERIOR simulation tool, our experts will support you in creating innovative compensation models that meet this challenge.
Many insurers still need to evaluate a suitable IT system for their business and frequently face the “make or buy” question. Finding the right IT system is no easy task.
In addition to having the right kind of market expertise, Q_PERIOR also has the necessary assets and is familiar with the potential providers, requirements catalogs, and assessment tools for the entire selection process to serve as a project catalyzer.
Insurers currently have the opportunity to become pioneers and create an innovative image for themselves through better market positioning and an innovative image. Taking an anticipatory approach is especially important here: The compensation model should be designed such that it will be armed and ready for the next wave of regulatory challenges.
Q_PERIOR’s sales management experts will be happy to support you in obtaining a holistic view of the specific challenges your business is facing and structuring your compensation models to be ready for the future.