Survey finds brokers favour performance-based compensation
Published: November 7, 2018
CATEGORY: Industry News
Should insurance brokers only be paid for the business they generate? It’s a question that has been asked by Canadian Underwriter during its annual National Broker Survey and the results may surprise you.
Over 250 broker owners and principals discussed various ways to increase sales capacity in a brokerage. The four points of interest were profit-sharing plans, employee recognition programs, employee share-owning plans, and performance-based compensation.
It is this last point that is likely to stir debate in the broker industry. Broker owners and principals are seemingly on board with the concept of performance-based pay. Moreover, such a financial structure could cover 100% of an employee’s salary.
Of course, that’s a tough proposition to sell to brokers. Owners and principals will have to convince brokers to accept the possibility of zero pay unless they perform. On the flip side, high-performing brokers will be tempted by the huge commissions availble for successful results. It’s an all-or-nothing concept that means no sales, no money.
Many brokerages would favour performance-based compensation as it would reward good brokers and weed out poor performers. However, a question worth asking is does paying based on performance increase the capabilities of brokers and drive more sales?
In its survey, Canadian Underwriter asked, “how beneficial have each of these practices been for improving the performance of your brokers?”
198 broker owners and principals confirmed they use performance-based compensation, with 66% claiming it is the best process for paying employees.
“Is it effective? Absolutely,” said Ryan Kirk, vice president of operations for eastern Canada at Surex Direct.
“One of the reasons why it is so effective is we don’t hire our brokers as employees, we hire them as independent contractors,” says Kirk. “So, they look at their job as their own personal business in a sense, kind of like a real estate agent. Their efforts are rewarded and there’s no cap or limit on what they can earn.”