How are you Compensated?

Are you selling a product, or are you out there solving problems? Listen, you don’t have to be an insurance salesman to succeed in this game. And guess what? You also don’t have to rely on commission as your only form of compensation!  Today, I’m going to tell you about three ways that we get paid without taking a single commission dollar from our carrier partners. If you don’t think that changes how customers perceive you, you’re kidding yourself.

One of the things people love to hear me talk about is how we get compensated. And honestly, it’s one of my favorite topics too. I love to talk about how I get paid. Who doesn’t, right? Well, here’s the deal. There are ways that you can get paid without taking a commission from the insurance carrier. Did you know that? See, a lot of people get caught in quoting business. That’s what they do. They quote business. “Let me quote your business and see if I can win it.” That’s commoditization and selling a product. It’s not solving a problem.

Don’t Engage Immediately Before Renewal

I don’t even waste my time dealing with companies in that 30, 60, 90 days before they renew. I want to engage with them a month or two after renewal. Here’s why. Number one, the loss runs are still fresh. They don’t have to go to their agent to get lost data that’s credible. I can analyze everything just as if I was going through a new business submission right now. The other thing is if they had a lousy renewal, they’re probably still irritated by it, and you can use that to your advantage. The other reason is it gives me about a six to seven-month headstart on all the doorknockers and telemarketers who were going to try and get in to quote their business. While they’re wasting their time, I’ve already built a relationship over six to seven months prior, and I’m not going to get out of that account.

If I don’t Place the Insurance, How do I get Paid?

Here’s the thing, though. If you’re not placing the insurance, how do you get paid? Well, there are a few ways you can get paid. One of the things that’s beautiful for us about leading with workers’ compensation is that we can go back and file aggravated inequities in our state for up to three years.  Maybe the experience mod’s wrong, or the Florida Contract or Premium Adjustment Program Credit hasn’t been on the policy.  Perhaps the policy is missing the safety credit, drug-free credit, and you can prove those things.  Then, you can petition NCCI to add them and then go back to the carriers that were on those policies and get the money back.

Find the Money to Get Paid!

Then, what we do is we say, “Here’s the deal: we’re going to find the money for you. We’re going to build our relationship with you over the next several months. We have to get paid. I know that I can’t come in and talk to you about adding an expense line to your income statement. So I want to find some money. Let’s split that money 50/50.” Our clients and prospects love this approach. They don’t have to pay for our services. You’re cleaning up their stuff, and you’re learning more about their operation while giving them valuable resources. We even engage in the loss control and training side during this time because we have the cash flow to fund it. That’s an easy, easy way to do it.

Another way is to review their audits. Look to make sure there were no mistakes in their audits. Most carriers at this point are outsourcing all of their audit function, and they don’t do anything in-house. So looking for errors in audits is an excellent way for you to find cash, and guess what? Split. Split The found money.

Charge a Service Fee

The other thing is my firm prefers to work on a service fee. Agents want the same respect as accountants and attorneys, but yet we still operate like insurance salespeople. Ned Ryerson from Groundhog Day. I mean, that’s what people see when you tell them what you do. If you work on a service fee structure, you appear to be more professional, and guess what? You don’t have a vested interest in the carrier where you’re placing a policy!  You know it’s the best coverage and the best overall value for your client. They realize that because you don’t have any commission at stake. They’re paying you directly.

What this looks like is when you go to place coverage, if you’re able to do it in your state, you ask the carrier to quote that piece of business net of commission. If you write a policy that’s a $100,000 and it has 15% commission, they’re going to reduce the overall premium by the value of the commissions that would have been in there, so the premium drops and becomes lower. Then, you bill your client directly.  Bill them quarterly, monthly, however you want to do it, direct for your services. Guess what? Fee for service is an excellent way for you to project cash flow too. You can know when you’re billing when the revenue’s coming in, and all of that. It’s a great way to change the perception of the client and view you as a trusted advisor, as opposed to an insurance salesperson.

Put Your Money Where Your Mouth Is!

But here’s number four, and this is the secret sauce a little bit, but it’s one that I do all the time. When we go in, and we engage with a company early on, right after renewal. We look at what the losses have averaged over the last several years, we are willing to take a service fee that is guaranteed, or we’ll take a lower service fee, and then we will put some of our money at risk.

I’m going to give you an example with, by the way, a chance at a bonus. So I’m going to provide you with an example. I worked with an account one time that was paying $250,000 in commissions because they had a massive property schedule of horrible frame construction. I didn’t need $250,000 to go in and take this account over, give them the risk management services that they needed, and drop their out-of-pocket loss costs on their casualty lines because the account was driven by property premium.  When I walked into the meeting, I looked at the CEO, the CFO, and the COO, and I asked them, “Where’s your risk manager?” They said, “What? We don’t have a risk manager.” I said, “Well, you’ve averaged $457,000 worth of out-of-pocket loss costs over the last three years. I would assume you would get some sort of resources to help you with those results. I mean, you’re paying $250,000 in commissions right now to someone who should be giving you something.” They had no clue what I was talking about. Isn’t that crazy?

Until next time:  Kill or be killed!

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