Pitfalls to Avoid in Outsourcing Insurance Commissions Management

Optimising modern business efficiencies is primarily about concentrating on core

business activities and strengthening the bottom line. Anything that facilitates this

process is encouraged in the modern business scenario. One of the sectors where

this is given a lot of importance is the insurance industry where the main activity is

devising and structuring new policies with competitive prices and then selling

them. But to sustain this task there is a need for huge investments in infrastructure

and manpower, something that they can ill afford if they have to bring in products

at attractive rates.

The range of support services for the insurance business includes amongst others

data processing, payroll and administrative functions, claims management, policy

management and commission management. All these are today being outsourced to

specialist agencies in an effort to cut the flab and make the business more lean and

viable. However, the insurance companies are benefitted the most when they

decide to outsource insurance commissions. This is because of its inherent

unique features.

Commissions are based on business generated by the agents and hence unlike

regular salaries differ from month to month. Again, all schemes do not yield the

same amount of commissions so calculations of the total monthly amount payable

can be extremely complex. This lack of uniformity is what makes commissions

management so tricky and is one of the reasons why it is generally always

outsourced.

Nevertheless, there are certain pitfalls to avoid in outsourcing insurance

commissions management and a detailed research should be made for the

following reasons on the shortlisted outsourced agencies before one is finalised–

Need for Specialised Infrastructure – It has to be understood that not all

outsourced agencies handling commissions management can tackle business

of all scales. Many insurance companies outsource without verifying this

aspect. This results in delay in settling commissions payable to agents and

compromises with accuracy. To avoid this pitfall the antecedents of the

agency, their past track record and the testimonials of previous clients

should be thoroughly looked into.

Software and packages in use – When insurance companies outsource

insurance commissions management they have to ensure that the outsourced

agency is making use of the latest software and relevant packages so that this

recurring task is completed every month without delay. One of the pitfalls

occur when this aspect is not given importance. It has to be made sure that

the outsourced organisation is using the comprehensive Commissions

Management package. This system takes care of the total commissions

payable process in detail and all the data therein is supplied by the insurance

company. Those that do not incorporate this package will not be able to

provide top end commission payable results.

Data security – This angle has to be looked into before the decision to

outsource insurance commissions management to a particular agency is

finalised. Data security is of utmost importance as the personal details of

agents of an insurance company as well that of their policy holders is at

stake. Not ensuring this can have disastrous consequences in case of breach

of security.

These then are the factors that should be looked into if pitfalls are to be avoided for

outsourcing insurance commission management.