An insurance executive confronted me a few weeks ago with this brainteaser: How can we engage and motivate a (seemingly) unlimited number of independent agents with a limited amount of resources?
Insurance carriers who distribute through independent agents know this challenge all too well: Carriers need to engage top producers, who, though small in number, may be responsible for a large amount of total sales; carriers also need to engage the middle of the population, as this group often shows the greatest potential for near-term growth; and carriers can’t ignore the smallest producers, especially those who are new agents at the outset of their careers—or carriers risk the long-term growth of the agent population.
In the face of this conundrum, carriers often respond with an incomplete solution. Top performers are typically well-engaged through bonuses, contests and other programs that reward high levels of production. But the remainder of the agents—often 80% or more of the total population—see far less attention.
Often, carriers promote their “top performer” programs to all agents, only to be met with low participation rates and high levels of agent apathy. A few agents may actually achieve the top-performer goals, but even then, the outcome may not have been motivated by the program. We often hear of agents who are surprised to receive an award for a contest they didn’t know existed. As a result, a significant portion of the carrier’s investment is wasted.
To illustrate this point in greater detail, we conducted a survey of more than 500 first-line agency managers (individuals who both sell insurance and manage others). In the survey, we asked agents to state their preference among two bonus options:
a) $50,000 bonus paid to the top 5% of producers
b) $5,000 bonus paid to the top 50% of producers
These two programs have the same economic cost to the carrier, and the same theoretical expected value to an agent. However, the actual value of the program differs significantly depending on each agent’s expectation for future production.
About 15% of the agents we surveyed chose option A. Not surprisingly, these agents tended to have strong historical sales production, exceeding the other group—those who chose option B—by about 25% on average. But the agents who chose option B were not unimportant. In fact, they accounted for 75% of overall sales production.
Interestingly, historical sales production alone did not explain agents’ choice of bonus programs: past goal attainment, personal risk aversion and even geography contributed to agents’ preferences. Our findings suggest that carriers need to dig deep into agent profiles—beyond just sales results—if they want to better tailor their programs and drive engagement.
In the end, many carrier programs resemble option A. And those programs often do an excellent job of engaging a small, valuable fraction of the agent population. But to optimally drive sales results, carriers need to think about engagement more broadly. The best answer may be to use multiple, targeted (or tiered) programs to reduce waste and increase appeal. Otherwise, carriers might miss out on the other 85% of agents—and on the sales growth opportunity they represent.
How have you tried to motivate the middle of the pack? Share your strategies for boosting engagement—with both top- and mid-level performers.