Insurance Complexities for the Compensation Industry

Incentive compensation can be a powerful tool to motivate and reward employees in the insurance industry, but it also presents several challenges that must be carefully managed to ensure that it achieves its intended goals. Having an automated system that supports that goal is very important. 

Choosing an ICM provider varies depending on the type of activities that you need to support, with most industries being very similar even though they are unique in the business that they support. Banking and Telecommunications, for instance, are generally very high-volume activities, however Telco pulls back a lot of activity and has claw backs while banking is complex in its crediting and is pretty solid in its progression of data through the system and not having to reverse it. This area can be very challenging in these two industries when you must assign customer accounts or contracts that need to be reviewed to adjust transactions. Ensuring the correct assignments of credit can be tricky. 

The insurance industry complexity in an ICM tool goes beyond just the compensation calculations and payments. It is the assignment, tracking, and management of producers, channels, and accounts that bring it to a new level. This presents different challenges that must be addressed when selecting a tool that will support you into the future. 

Some of these challenges with incentive compensation for the insurance industry include:

1. Data quality and analysis: Incentive compensation plans rely on accurate and timely data to measure performance and make payouts in a challenging and constantly evolving industry.

  • Data quality and analysis availability is a must
  • Integration from internal and external sources

2. Long-term perspective: Insurance companies must always consider the long-term lookback of activity, with policies and contracts that can last many years. Tracking relationships to policies and contracts is key in incentive compensation plans designed to support the long-term success of the company, rather than short-term gains.

3. Compliance and regulation: Insurance companies are heavily regulated and must comply with numerous laws and regulations. Incentive solutions must be designed to ensure compliance with these regulations, which can be a challenge. Specific areas of focus include:

  • Onboarding
  • Licensing and appointments
  • Reporting

4. Complexity of products and services: Insurance products and services can be complex, with several factors that impact crediting and assignment of policies for payments. This complexity can make it difficult to design incentive compensation plans in systems with multi-level relationships. The areas to be considered include:

  • Compensation management and unique arrangements
  • Multiple tiers and rate table structures
  • Portal access
  • Free looks; back dated adjustments
  • Debt management and recovery

When considering and looking for an ICM solution to support insurance, more time, planning, and cost goes into an insurance implementation due to these four key areas than with other industries. The challenges and uniqueness itemized above requires a different approach and effort to successfully support the selection, implementation, and ongoing management of the tool. Often, most companies solve the producer and portal areas with a legacy solution and then try to force an ICM solution in for the compensation. The disconnect between the solutions causes many issues with the data, matching assignments/credits, and ownership of policies and issues with backdating activity.  

With Insurance, the link to contract or policy becomes a standout requirement in that it is key in the processing of the activities and management of compensation end to end. This one area anchors and is linked to data quality, lifecycle of policies, compliance, and complexity of products in supporting insurance compensation.

Article written by: Mike Noto

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