Hi there! It’s been
awhile since I've been on here. I
apologize for the delay. I’m happy to
say that things are going terrific here in Iowa. Ava, my oldest, is in 1st
grade!!!! Mia, my middle one, is in her first year of preschool, and Kai, my
baby, is literally running everywhere.
Life is busy here to say the least.
As many of you know, my specialty is working with people in
the insurance agency and broker world. My
area of emphasis within this are producers, account managers and account
executives, value added service staff like claims and loss control, and senior
management. As I've been talking to
producers lately, I've noticed a trend.
Many of the producers I’m talking to are thinking about their commission
split.
Based on my experience the typical split in the industry is
a 30/30 new and renewal split. From
there the percentages go up or down based on resources and company
philosophy.
Additionally, I see three variations on this:
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| A great commission split does not mean you'll be swimming in money... |
Additionally, I see three variations on this:
Graduated Split
This is a split that I personally think is the most
attractive. How it works is that the
producer’s split increases over improves based on certain trigger points –
typically this is either annual new business production or overall book
size. I like this because it rewards
long term success.
Unequal Split
The unequal split is a split geared towards rewarding a very
specific behavior. Typically I see this
in an organization that values new business production and in it they might
offer something like a 40 new 20 renewal split meaning that in order to keep up
your level of income you have to keep selling new business.
50/50 Split or
higher
This split is one that many producers crave as they feel
like it adequately rewards them. However,
there is a downside to this type of split.
First, in many situations the producer assumes a lot of the expenses
which effectively draws the split lower.
Even if this isn't the case the increased splits means that there is
less money in the pot for the agency to invest in resources for you to keep
growing your book.
So what does this all mean?
First, I think that it means that there is no magic bullet when it comes
to splits. If there was one that worked
better than others then everyone would be using it. Secondly, I think that it means that in most
cases, especially in the unequal or equal split (the graduated split is a
different animal that truly can offer you more in my opinion), that I would
argue producers typically end up in the same spot. What I mean by this is that if the baseline
is 30/30 any change up or down in most
cases reflects investments in resources or staffing. A really high split might be attractive if
you feel you can manage your expenses better than others. The lower split might be better if you need
expensive resources that are easier to swallow with the pooled resources of the
entire agency.
Ultimately, I think that producers spend too much time
focused on their splits. Although there
are certain outliers where the splits are unusually low or lucrative, in most
cases they are a wash from company to company.
Instead, as a producer you should be looking at if the organization can
help you maximize your production and through that your earnings. After all, a 35/35 split of a $1MM book of
business is better than a 50/50 split plus expenses of a $600K book of
business.
Have a great week everybody!!!
As always please let me know if you have any questions or comments. I can be reached by email at sthompson@insurance-csg.com. I’ll see you then!
Check out some of my recent articles on the blog here:
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