P R A D

strategic and valuable skill sets are those likely to succeed and they can command larger compensation packages.

The 2014 Best Practices Study showed that, for agencies of all sizes, the typical payroll for personal lines producers is approximately 30% of their book of business. However, firms arrive at this 30% in a variety of ways. When it comes to compensation plans, one size does not fit all.

Below are three examples of compensation models for personal lines producers that were gleaned from participant interviews and other firms with strong personal lines practices.

1) Base salary plus incentive for new business written . This is the industry’s most common producer compensation model. It provides a base salary plus a percentage of the new business written, but no commissions are paid that are specifically tied to renewals. If business was referred internally (e.g., from a commercial lines or employee benefits producer), then a lower commission rate may be paid (typically 20 points less). The referring producer is usually paid a first year commission as a referral fee, but no renewal commission.

Example:

Base salary between $35,000 and $45,000. Commission rates of 40% to 60% of new business written, 20% deducted and paid to referring producer if applicable.

2) Commission-based model with draw based on a percent of prior year’s pay. This model is more common for high net worth personal lines producers than main street producers since high net worth producers are often involved in maintaining the client relationships they produce. During their initial period (typically the first three years after hire), producers on this plan receive a declining base salary as they build their book of business.

Example:

Base salary of $45,000 at start that is reduced periodically to $22,500 over three years. Commission is paid when commissions earned (per the firm’s personal lines producer commission schedule) exceed the base salary.

3) Salary plus discretionary bonus based on the achievement of various goals and activities defined by management .

Example:

Base salary of $40,000 plus incentive bonus of up to $10,000. Achievement of the full bonus is tied to various activities such as hitting a new business goal, increasing the revenue per account, adding to the list of centers of influence, providing cross-sell referrals to other departments, increasing the firm’s visibility in the community, etc.

There are countless variations on the ideas presented above. Finding an appropriate compensation plan for personal lines producers remains a puzzle for even the best agents and brokers in the

55 Producer Recruiting & Development Study