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Pinpoints Profits: New Software Smoothes Road to Compensation

Ed McKinley January 2007

The road seems less bumpy these days for insurance carriers that use state-of-the-art automated compensation to calculate and track agents' commissions. A single streamlined third-party system can replace a hodgepodge of legacy software and manual processes, users say, helping to reduce clerical work, increase accuracy and improve reporting. Moreover, carriers report that the software opens up a whole new world of analysis that pinpoints the true sources of profit and helps identify and retain the best agents.

The accuracy rate for commissions at Blue Cross Blue Shield of Florida, for example, has improved from 80% before introducing up-to-date automated compensation to 95% after the implementation, says Linda Lamb, BCBSF vice president of sales business management. The remaining errors arise from data entry miscues or software problems outside the system, she says.

Accuracy has become easier to attain after introducing a new automated compensation system at Coventry Health Care, Bethesda, Md., says Claire Herrell, the company manager of broker systems. "We actually do feel we were accurate in what we were paying before, but this way it is much less time-consuming to guarantee that accuracy," she says.

Bringing together the storage and functions that had been spread across a number of systems into a single new program improves accuracy by helping to ensure that carriers apply business rules consistently, says Bill Price, BCBSF director of sales compensation. "A clear objective [with the new system] also was to ensure that we're applying consistent business rules," he says. "When you have multiple platforms and multiple data feeds, it's sometimes difficult to ensure you are consistently paying the transaction in the same manner on all of the systems."

Checks and balances in the new systems ensure accuracy, comparing data when a commission is entered in, says Tracy Cale, commission manager for MetLife Auto & Home Insurance Agency Inc., Warwick, R.I. Cale works for the carrier but in association with a company-owned agency.

Better controls and audit trails in the new BCBSF system serve as reality checks on accuracy and make administering the system more comfortable, says Lamb. "We are catching errors and identifying issues that need to be worked out-even if it's outside our comp process."

Accuracy also improves because the new systems eliminate manual processes, carriers say. "Anytime when you have a lot of manual processes going on, the potential for error is greater," says Price. At many insurance companies those manual processes can include comparing figures on spread sheets. The new system at BCBSF gives agents online access to information they used to get from printed statements and reports, while also automatically populating some blanks on forms, including the commission rate, to reduce data-entry errors, Price says.

Cale also says she likes having better accuracy and having more online reports. "In the old system, we could key it in and pull some ad hoc reports," she says, "but nothing like we can pull now. We can actually get down to the distribution level, line of business and the state that it came from."

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