Producer Compensation and a Fee Management for a Small Group Market
Business Problem:
The largest privately held group and individual insurance brokerage company in the United States, provides benefits to over 900,000 covered lives for over 5,000 client companies. The brokerage takes in payments individually from contract owners and in bulk from carriers. Producer compensation must be calculated and paid, fees allocated and premium remitted to carriers. The brokerage operates as several independent companies each with their own sales organization and utilizes a number of different compensation arrangements and fee schedules within each line of business to attract and retain a highly motivated producers.
Due to the brokerage company’s rapid growth, it’s ability to effectively manage and pay compensations was deteriorating. Their compensation system was written in COBOL to run on a standalone PC and was not supportable by the current IS staff. Compensation payments were often late or for incorrect amounts.
The brokerage needed an application that had the following characteristics:
- Year 2000 compliant
- Allows unlimited sales organizations
- Access to administration fee information
- Automates collections
- Access by multiple users
- Detailed reporting
- Financial auditing capability
Solution:
RESolutions Consulting developed a fully object-oriented business application designed for the purpose of managing all aspects of the brokerage’s compensation and fee allocation process. System functionality included:
- Allocate compensation and fees associated with each contract
- Contract set up includes management of multiple placements, each with it’s own compensation and fee arrangement for maximum flexibility. Compensation and fees may be split between unlimited producers.
- Manage licensing requirements
- Set up for entities receiving compensation includes licensing requirements that can be accessed during the compensation process.
- Manage carrier receivables
- Carrier receipts are allocated for payment through an automated process with an electronic feed. The amounts are tracked against the calculated compensation. Payments can be handled on a net or gross billed basis.
- Manage policyholder receivables
- Policyholder receipts are allocated to individual contracts. The allocation process calculates compensation and fees to be paid. All detail is available for review and payment.
- Payout management
- The compensation area reviews payout information online and initiates an electronic interface with the accounting system for check production. The compensation system generates statements, providing check detail for the producers. Integrated Reporting
- Detailed and management reports can be selected and viewed online or printed. These reports identify all aspects of processing and indicate exceptions.
- All compensation and payment details are available for reporting and ad hoc reports can be easily created as needed.
- Multi-level Security
- The system provides highly flexible and user-specific security features allowing for customized system security controls at the application, data, user interface and organizational levels.
Return on Investment (ROI):
The following is a partial list of the ROI achieved by the brokerage:
- Financial control over cash flow, receivables, payables, and exception reporting greatly enhanced through additional levels of detail provided
- Integrated cash receipt and compensation processing result in a significant reduction of incorrect or delayed payments to producers
- Electronic upload eliminates errors caused by manual allocation of monies received from carriers
- Unified database of contract, producer and carrier information significantly improves workflow and information sharing
- Electronic interface with accounting/check writing system eliminates errors caused by re-keying data
- Each organization has immediate access to its own data for sales and marketing campaigns and the comfort that the data is secure from outside access
