Redesigning Distributor Compen-sation as a Shared Service – PWC
Article Synopsis :
Insurance carriers are always looking to lower fixed costs. Meanwhile, their distribution partners are always looking for greater transparency and ease of doing business.
Insurance compensation systems are typically complex and cost intensive. In “Out with the many – Redesigning Distributor Compensation as a Shared Service” PwC looks at compensation systems through the lens of legacy operating environments, suggesting carriers can reduce both complexity and cost by eliminating legacy issues via a Shared Service approach.
Fragmented business operations – defined as different compensation and distribution management rules across different business units – are the crux of the problem for both insurers and distributors. Fragmented business operations lead to higher costs and a disconnected experience with distributors and partners, who crave transparency and a seamless experience. Breaking the problem down categorically:
Key challenges faced by insurers:
- Inconsistent service experiences for partners.
- Multiple fixed operational costs.
Key challenges faced by distributors:
- Inadequate transparency on individual sales.
- No real-time access to sales data.
- Shadow accounting, which results in compensation ambiguity.
- Multiple lines of entry against a single sale/ partner.
PwC suggests these challenges can be mitigated through Shared Service compensation models listing five steps which will help in the implementation of same:
- Perform a strategic assessment.
- Identify a compensation software solution.
- Create a change management structure.
- Assess organizational readiness and undertake employee training.
- Implement the new system.
The key benefits of a Shared Service deployment model, which ultimately leads to the consolidation of operations and platforms, include:
- Improved partner experience with a consolidated and drilled-down view of earnings per business unit via digital portals.
- Consolidated partner compensation models on a single platform.
- Agile and high-volume processing.
- A way to harness valuable information from retiring legacy system specialists avoiding business disruption.
- Lower enterprise-wide costs.
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Digital Insurer's CommentsWhen carriers update legacy technology they often begin with policy administration (PAS). It’s a good place to start, but it shouldn’t be the end.
Modern PAS systems free up capacity to address a serious problem that has been a pain point for years: agent compensation.
“Tell me how you’re going to pay me and I’ll tell you how I’m going to work.” Carriers can extract superior growth from existing channels by delivering better compensation models in a more transparent fashion.
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