Having spent more than 7 years modeling and implementing insurance incentive compensation plans, it occurred to me that I should share my experiences about the industry, its tends and the serving application, in this blog.
Over the years I managed to deploy solutions for Life, Annuities, Health & Property & Causality. The one consistent theme across the industry is every customer/insurer/carrier has its own interpretation of the market conditions and applies their own strategy (both external and internal) to retain their position and/or advance. While there exist myriad parameters that go into the analysis before a strategy is cooked up, one of the most important is how the insurer decides to structure the incentive compensation for their agents. Even within the same line of business (e.g., Life, Annuities) the strategy (in the context of the details of the insurance compensation plan) could vary significantly. Agents are often compensated differently than in other industries, hierarchies and contract structures are usually more complex, compliance requirements are often “strict” and enforced regularly. There is an ever increasing need to improve the services provided to the agents, calculate and disburse the commissions properly, offer the ability to quickly react to market changes and capability to monitor/report.
This inherent complexity in the way business is done and regulated, created a space for applications that manage the end to end automation of this process. Amongst these, the noticeable 9 ICM vendors are Callidus Software, Versata, CSSI, MajescoMastek, SAP, SunGard, Synygy and CSC. Like any other, each tool has its pros and cons (which I ll not cover here) but clearly the market offers an opportunity for consolidation (of ideas/features) and to come up with a insurance vertical specific solution. I say this because although most of these products solve the problems in insurance domain, they are also designed to handle problems in other industries as well, making the end user experience (workflow) a bit generic.
I believe this is where the opportunity for the application vendors exists. An insurance vertical specific solution should zoom-in to the critical aspects of these business processes and provide tools/workflows to view, capture data, decide, monitor and report in real time. The ease of use of the tool, goes without saying. At a gross level these tools should answer questions like, “How are the sales territories performing?”, “What are my revenues by territory?”, “Which territories do I have a better shot of selling Annuities in?” “What is the impact on my revenues when I change comp plan next year” etc… and at a more finer level, the tool should capability to manage nitty gritty details of onboarding (like background checks, integration with BIG etc…), the distributor/agent and channel administration (like, credentials (licenses, appointments, registrations, EO coverage, courses/certifications, hierarchy management etc..), compensation plan management (ability to add/remove agents from comp plans based on dates, ability to offer one off compensation rates to agents, handle compensation for up selling and crossing selling products, salaries, bonuses, commissions etc..). The maturity of the tool will showup in its ability to offer control over these processes in the way customers desire. Given that the customer wears multiple hats in the form of the Business user, Operations, Technology, makes product design and management interesting and challenging.
Corroborating this experience, a recent IDC report finds that the market for automated sales incentive compensation management applications has rebounded, and will continue to increase its profile and growth. This is exciting times for the customer as they have a lot to chose from and for the product managers to come up with with a simple enough and yet affective product to address the market needs.