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From Resource, September 2007
Copyright by LOMA
Service
Stratification
Many companies have begun
grouping their producers into high- and low-volume segments and providing
different levels of service accordingly. Officials from two insurance
organizations talk about how they provide preferential service and perks to
high-volume producers/agents, and how you can do the same in your organization.
By Stephen Hall
For a number of players in the
insurance and financial services industry, a small percentage of their
producers/agents provides the majority of their business. Naturally, most
companies in that position want to do all they can to keep these producers
happy—and, more to the point, discourage them from thinking about switching to
another insurance company, one they believe would give them the service and
attention they deserve.
This
desire to hold on to star performers has prompted some of these companies to
start providing the kinds of tiered service, perks and other incentives that
would not only reward such performance, but also motivate other producers/agents
to do well enough to enjoy those perks as well. At the recent Life Insurance
Conference1 in
Atlanta
,
Cal
Schattschneider, FLMI, CLU, CPA, a director of underwriting at Northwestern
Mutual, and Steve Douglas, AALU, AIAA, ACS, director of underwriting at Woodmen
of the World Life Insurance Society, shared presenting duties during a
concurrent session, titled “Stratification of Service to Leading Producers.”
In this session, they discussed how their organizations provide preferential
service and perks to high-volume producers/agents and encouraged attendees to
return to their organizations and implement whichever of those methods and
programs they felt would work for them.
Northwestern
Mutual’s Service-Based Incentive Program: Putting it Together
To set the proper context for
his presentation, Schattschneider (first syllable sounds like “shot”)
described his company and its market segment. “At Northwestern Mutual, we have
an exclusive career agency distribution system,” he said. “About 60 percent
of our producers’ first-year commission is from life insurance, and about
three-quarters of that is whole life insurance, so we’re primarily a whole
life insurance shop. Also, this year we are proud to have surpassed $1 trillion
of individual life insurance protection in force, and we’re celebrating our
150th anniversary.
“So
we’ve got one distribution channel, and I would argue that it’s very
healthy,” Schattschneider continued. “So you might ask, ‘Why risk
alienating some of our producers by differentiating and recognizing a different
group? If everything is working pretty well, why change?’ Well, when I talked
to the head of our agency department, he said it wasn’t that we were losing
our top representatives to other competitors. In fact, our retention rate for
reps that stay with our company for more than five years is over 90 percent.
Stratifying our service was something we did to be pre-emptive because we knew
there are some competitors who provide extra rewards to their top producers. So
as a company, we thought, ‘Rather than wait until we start losing people, why
not act now?’ Being able to describe what you can offer the best producers
helps you attract and retain the best, and it helps you to differentiate
yourself in an increasingly crowded marketplace.”
According
to Schattschneider, Northwestern Mutual began with an existing incentive
program—an annual recognition dinner for high-performing representatives—and
built upon that to create the Northwestern Mutual Forum, which was formed in
1997. “The Forum is designed to help our top financial representatives achieve
their highest level of productivity and excellence,” he said. “Our
representatives are required to earn this status annually, and our criteria are
very simple. We have a premium credit hurdle rate based on the 200th Forum
financial representative’s production for the prior year. Based on 2006
results, the target for 2007 is $380,000. This program structure means any
quantity of reps can be in the Forum in any given year. We chose not to
structure the program by the number of qualifiers—such as allowing in only the
top 250 reps, for example—because reps would never know what level of
production would assure them a spot in the Forum. When you’re motivating a
field force, it helps to have a crystal-clear target. We can publish the exact
premium credit target for the next year so that they know exactly what to shoot
for.”
So
once a representative makes it into the Northwestern Mutual Forum, what do they
get? Before answering that question, Schattschneider pointed out that he is an
underwriting director and that he understood if anyone in the audience was
wondering why an underwriting director was talking to them about segmenting
producers, instead of an agency person. “Here’s why,” Schattschneider
said. “Every time we ask Forum reps what they think is the most valuable perk
of being in the Forum, the answer is always the same: Forum underwriting, which
is the division I currently manage. So what exactly is Forum underwriting? We
took some of our high-performing underwriters and brought them together to
create the Forum underwriting division. We asked them to provide more service
and more communication throughout the entire underwriting process, using our
standard underwriting guidelines, to these top-tier Forum representatives. To
enable the staff time to do that, we have our Forum underwriters inventory about
10 percent fewer cases than our other underwriters. We also have a full-time CPA
on our staff that assists on financially complex cases. The CPA can call a
client’s CPA—or their tax attorney, depending on the situation—to have a
direct dialogue to assure the underwriting process gathers all relevant
information and considers all perspectives. In the eyes of the Forum rep, our
CPA is a credible, knowledgeable resource who can talk on par with their
client’s advisors, assisting the financial representative in building trust
and strong client relationships.”
Other
benefits of becoming a member of the Northwestern Mutual Forum include a
priority, toll-free 1-800 number. “Because they are in the Forum, they go to
the top of the respective queues for life, DI, investment products, and a few
other key areas,” Schattschneider said. “We also hold a couple of special
events throughout the year, but the big one is the Forum Symposium, a four-day
meeting in
Scottsdale
,
Arizona
. While admittedly this is a nice location to hold a meeting, the real perk is
the meeting itself. Forum reps attend educational breakout sessions, and they
network and share best practices among their peers. We also have a special
recognition dinner that takes place during our annual meeting in
Milwaukee
.”
In
addition, each Northwestern Mutual Forum member receives an individualized
marketing plan, according to Schattschneider. “Our
Marketing
Resource
Center
will work with any Forum member who calls in and says, ‘Can you help me out?
My particular business practice targets engineers,’ or ‘I work mostly with
CPA firms.’ Our marketing consultants will work with the representative to
develop local marketing materials for them.”
Forum
reps also receive a personalized annual compensation report. “This report does
two things,” Schattschneider said. “First, it enables reps to see each piece
of their income and how it’s growing so that they can best understand how to
keep growing their business. And secondly, it compares them to their peer
averages. Forum representatives are a competitive group, and giving them that
snapshot not only helps them to keep their competitive juices flowing; it helps
motivate them to stay in the Forum next year.”
Does
Service Stratification Work for Northwestern Mutual?
So is the Northwestern Mutual
Forum actually succeeding in its quest to motivate representatives to increase
productivity and improve performance? “Going back to 2000, I’ve analyzed the
premium credit hurdle rate and the number of qualifiers,” Schattschneider
said. “Any time more than 200 qualify, it means we have a growing, healthy
group of producers. We have averaged over 250 each year on an ever-increasing
premium target, so by those two measures, we’re seeing some good results.
“Other
evidence that I believe supports the benefit of doing this segmentation is that
our financial representatives set targets to achieve Forum,” Schattschneider
said. “Prior to the creation of Forum, they would often set targets to improve
their performance the next year by a certain percentage, or they would strive to
make the Million Dollar Round Table (MDRT). Now, when a rep starts at our
company, it doesn’t take them long to discover the benefits of Forum and use
it as a stretch goal: ‘In three years, I’m going to get into the Forum.’ I
routinely hear that Forum membership is a big motivator for our field force.”
Through
its regular field surveys, Northwestern Mutual has found that 98 percent of
Forum reps indicate that the special underwriting services they receive meet or
exceed their expectations. “And this is the top-producing group, so they have
pretty high expectations,” Schattschneider said. “Also, 90 percent say
they’re very satisfied or satisfied with the phone call services.” Not that
the Forum reps are the sole beneficiaries of the Forum program. “Since the
formation of our Forum underwriting division, we have realized efficiencies in
underwriting training, including keeping
up to speed on reinsurance issues. Also, having that core group helps us deal
better with industry trends that impact large premium and face amount cases.”
The
creation of the Forum underwriting division has also helped Northwestern Mutual
to more effectively utilize its underwriters, Schattschneider said. “We have
underwriters who enjoy providing increased service and communication to the
field, and those underwriters join the Forum team. We also have underwriters
that prefer a heads-down work style and prefer to concentrate on issuing as many
cases as quickly as possible. That may be an over-simplification, but by having
two different groups, we can have people better aligned with what we need them
to do.”
In
summary of his portion of the presentation, Schattschneider encouraged attendees
thinking of implementing a tiered-service program to try to see things from
their distribution channel’s point of view. “What we learned in organizing
the Forum Symposium is that for our Forum reps, it’s less about the trip and
more about the education,” he said. “So if you’re thinking about how you
can roll out something like this, make sure you understand what’s most
important to whatever distribution channel you might have.” The good news is,
what’s important to that distribution channel might not necessarily be hard to
provide. “Some of the things we initially did included setting up a 1-800
number, doing some more FedEx-ing, and more faxing. We also provided priority
access to some of the advanced-planning attorneys. These were things that were
relatively easy to set up, but they made a strong statement to our field
force.”
Lastly,
this concept of preferential service and perks has created a snowball effect
that has kept growing since the Northwestern Mutual Forum’s inception a decade
ago. “Providing our Forum reps with a service-based rewards program has
created a cycle that builds on itself and keeps getting better,”
Schattschneider said. “With the high-touch service we provide to Forum
members, we spend more time on the phone with them when a case is rated, for
example, so that we can help them understand the reason for the rating. When the
representative talks to the client, they can better explain the action, which
leads to higher client satisfaction, which results in a higher placement rate,
higher policy persistency, and ultimately more product value for our
policyholders. So this is a very good cycle that’s taking place.”
Woodmen
of the World and its Rewards-Based Incentive Program
Schattschneider then turned the
podium over to Steve Douglas, director of underwriting for Woodmen of the World
Life Insurance Society, who talked about the incentive programs his fraternal
organization has in place to reward its top producers and why it makes sense to
implement such a program in the first place.
“Incenting
top producers can take the form of contests, trips, conferences, or other kinds
of reward programs,”
Douglas
said. “LIMRA recently conducted a survey titled ‘Agents in
Paradise
’ to determine how successful incentives are from the producer’s point of
view, and I’ve gleaned a few interesting statistics from the survey2.
Of the more than 400 producers in 46 states who participated in the survey, 46
percent said that a sales contest—whether the reward is a conference, a trip,
or some other event—is a positive incentive. Seventeen percent said it’s a
waste of time, and another 17 percent said they like the recognition such
contests or conferences provide. Interestingly enough, the survey found that 19
percent of the producers changed their individual selling style based on the
criteria of a conference or contest.”
So how
does Woodmen of the World measure up, in terms of incentive campaigns?
“Woodmen’s program is a little bit more rewards-based, compared to the
service-based program that Northwestern Mutual has, but we are trying to roll
out some service-based incentives this year. Also, Woodmen tends not to focus on
the educational component during an incentive conference, and that’s based on
the feedback we’ve received from members of our field force. They really want
to just relax and enjoy the camaraderie that can be found at such events.”
The
annual field trip that Woodmen of the World hosts for its top-performing
producers is organized into two tiers: the President’s Club, which is a
relatively short trip that happens at one location; and the President’s
Cabinet, a weeklong trip that is held at two locations and is held exclusively
for the field force elite. The criteria for the annual trip consists of such
factors as application credits, new members, sales volume, net annualized
first-year commission (NAFYC) and persistency rates, among others. “Membership
is the lifeblood of our fraternal organization, and so we want to make sure our
incentives include some level of new member sales,”
Douglas
said. “So the annual field trip is designed to align the producers’
perspective and the organization’s perspective so that we’re both working
toward the same objective. For those of you who want to roll out a similar
incentive program at your own company, other measurables you may want to
consider include a business mix component, a continuing education or
professional designation component, or a recruiting and/or retention component
for some of your managers. Perhaps there’s a particular product you have
that’s been sort of lying dormant, and you want to add some criteria to your
incentive program that will help revive it. Just remember that organizational
goals can and do change, which will certainly influence the agent contract
requirements from year to year—and that, in turn, will influence any field
trip incentives you may incorporate into your program.”
As for
basic incentive rewards, Woodmen’s program includes round-trip airfare for a
qualifying producer and their spouse or a guest, as well as additional
recognition and perks for the President’s Cabinet, the Super Star, and the
“Top Hat” levels. “‘Top Hat’ is just our nomenclature for the top
state manager, the top area manager, and the top individual producer or field
rep,”
Douglas
explained. “The Top Hat winners get to address the entire group to share
their perspective on life, success and sales. And there’s a lot of recognition
and prestige that comes with that. So it’s not always just the trip itself;
it’s a chance to communicate with their peers and to have that kind of
profile.”
Other
incentive programs that Woodmen of the World has created include its Outstanding
Field Underwriting Award (a.k.a. the ACE Award), which
Douglas
helped to establish within the last few years. “This is something that’s
directed more toward our best field underwriting producers, and only 2 percent
qualify for this,” he said. “This is based on such criteria as use of
electronic applications, persistency, and how well business is underwritten in
terms of the application, compared to the final underwriting decision. So it’s
a very highly sought-after designation that includes perks on the underwriting
side, if a producer is able to meet those criteria.”
Woodmen
also has a Top 40 program, which takes a six-month “snapshot” of how reps
are doing in terms of achieving their 12-month production goals and rewards the
top 25 reps and 15 area managers based on the snapshot results. “Those people
get to attend the NAIFA (National Association of Insurance and Financial
Advisors) conference in
Washington
, and their registration and trip fees are covered,”
Douglas
said. “Also, the AMMO program (Advanced Markets Manual and Orientation) is
for our advanced markets where a producer who qualifies for the program can
bypass our special markets area when they’re writing certain kinds of
specialized business. So there are different things you can do that might be
related to some very specific objectives that you want to accomplish with your
producers.”
But in
addition to incentives and perks, Woodmen has begun making inroads into enhanced
service for its top producers,
Douglas
said. “We just started the Cabinet Concierge program earlier this year,” he
said. “It’s only open to those who qualify for the President’s Cabinet,
which is about 50 out of 1,200 reps. We’ve had some great success with this so
far. We’ve set up an exclusive toll-free number that our top producers can
dial to get immediate service. The director of that program recently told me
there’s only a six-second wait to reach a customer service representative, and
they provide personalized service, so the producers are very excited about that.
The program includes some easing of requirements throughout the operations areas
of Underwriting, Membership Services and Claims. The majority of the questions
received are answered immediately, with the remaining answered within 24 hours.
Since the section consists of a cross-functional group, almost all requests
received by phone, fax or mail can be processed in the section. And best of all,
if a producer has a question or problem that the Cabinet Concierge can’t
resolve, they will contact someone at the home office who can.”
In
summary,
Douglas
encouraged attendees considering an incentive trip or conference for their top
producers to put some thought into what they hope to accomplish with such an
event. “You need to make a firm decision ahead of time as to whether it will
be a vacation or a conference with an educational component,” he said. “If
you do it, make sure you do it right, and get feedback from the participants.
Find out if they liked it, if there’s anything they would like to change, and
whether the criteria were too hard or too easy. Finally, make sure that whatever
effort you put on is a function of the sales you want to achieve. And keep it
fresh by modifying your requirements from year to year.”
Footnotes:
1
The conference was jointly sponsored by LOMA, LIMRA, ACLI and the Society
of Actuaries.
2
Zabik, Joseph J. Agents in
Paradise
: Producers’ Views on Incentive Conferences and Sales
Contests. LIMRA, 2006.
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