Double Your Contingency Bonuses

Author: Chris Burand

If one company is willing to pay three times more bonus for the same results, for the same book, same ease of doing business, and the same benefits to your customers, why not place more accounts with that company? This is the question I have asked thousands of agents over the last twelve years and few ever answer correctly.

If one company is willing to pay three times more bonus for the same results, for the same book, same ease of doing business, and the same benefits to your customers, why not place more accounts with that company?

This is the question I have asked thousands of agents over the last twelve years and few ever answer correctly. Typical answers include:

1. “The company paying the low bonuses must pay higher commissions.”
   Reality: This is rarely the case.

2. “The company paying low bonus is easier to do business with.”
   Reality: This is rarely the case and even if it is, is the ease worth a 67% pay cut?

3. “It’s hard-to-place business.”
   Reality: As noted above, I am talking about companies that will pay more for the same book.

The true answers are:

1. Ignorance. Most agency owners never read their contracts. They never learn which of their companies pay more for their results.

2. Reluctance. A huge reluctance exists to negotiate contingencies with companies, which is funny because agents will typically negotiate everything else. If the fear is the companies will resent agents negotiating contingency contracts, then wouldn’t they also resent agents negotiating everything else too? Additionally, companies expect agents to negotiate to the point that some companies have reportedly prepared written scripts for their employees to use. The key is to negotiate in a positive manner rather than with a bullying attitude.

An even easier way is to make more money is to use your contracts more strategically. The best example of this is making sure you have your companies’ best contracts. The better contracts often pay two-four times more than standard contracts. Sometimes extra volume is required but definitely not always and even when required, the extra volume is often negotiable. The key is to ask for the best contracts because companies do not automatically award them to their best agencies. You have to ask.

Don’t get trapped in semantics either. More than one company claims to have only one contract(which may be technically true. But they have very different addendums and the addendums can make a huge difference!

Agents have many other tools with which to increase their bonuses too. Examples include using stop loss options better (most agents choose the least profitable), making sure you achieve the thresholds outlined in the contract (both obvious ones and hidden ones), and managing your claim reserves/closed claims effectively.

Taking advantage of all this opportunity is difficult without computer analysis and automating the process. One of the most valuable services we provide to our clients is our Contingency Contract Analysis™ service. We have built computer models of most all contingency contracts for the last 10 years. With the results provided by our analysis, agents can make smart choices quite easily. Our clients that really use the recommendations we make and the data we provide double their contingency bonuses. In the process, they do not alienate a single key company or adversely affect their customers.

Negotiating better contingency contracts is the best way to make more money without additional work.

Chris Burand is president of Burand & Associates, LLC, an insurance agency consulting firm. Readers may contact Chris at (719) 485-3868 or by e-mail at chris@burand-associates.com.

Copyright 2004 by Chris Burand. Used with permission.