ENGAGEMENT SUMMARY
Insurance Agent Commission Buyout Program
Multi-billion Dollar Insurance Company
Summary
The client is multi-billion dollar insurance company offering a comprehensive suite of insurance products across
multiple market segments. The company wanted to focus on improving business fundamentals and increasing
shareholder value as it recovered from Chapter 11 bankruptcy. The financial turnaround of the Long Term Care
(LTC) unit was a key component of their near term success. Reducing the $30M in annual commission payments
within the LTC unit presented a significant expense reduction opportunity for the company. Thus, the company
decided to offer a commission buyout to the agents who sold the policies in an attempt to reduce operating
expenses over the long run. The company asked multiple business groups to participate in the effort including
Agent Care (Customer Service), Legal, Tax, Finance, Actuarial, and LTC subject matter experts.
Scope
Leverage was engaged to assess the LTC block of business and develop the best approach for offering a
commission buyout to the insurance agents. Our scope involved researching the industry for similar buyout
strategies and best practices, analyzing the LTC business to ensure the buyout was financially feasible,
prioritizing the agents into logical buyout groups, designing the commission buyout program infrastructure, and
working with client staff and lawyers to develop a program launch and communications strategy that ensured
acceptance of the buyout process.
Key Challenges
Commission buyouts are a unique concept in the insurance industry. Not many best practices were
available to model
Data mining and analysis was a challenge. The company has made a number of acquisitions and the LTC
agent and policy information resides in 4 different commission systems
The agents who sold the business have unique circumstances. Effectively communicating with the
agents presents a host of challenges
Results Summary
Worked with Finance and Actuarial to analyze the LTC business and ensure the buyout was financially
feasible
Prioritized the agents into logical mailing groups based on ease of execution and financial ROI
Designed and developed the Commission Buyout Program infrastructure
Partnered with business and technology groups to design an end-to-end buyout process and assign roles
and responsibilities to those who will be actively involved in the process
Collaborated with the Agent Care, Legal, and Tax groups to draft a buyout offer, frequently asked
questions, and other agent communications
Developed a pilot approach and handed off to an internal resource for execution
Lessons Learned
Consolidate data into a single system whenever possible. When common data is stored in multiple
systems, data collection and analysis can consume critical resource time and effort that is better utilized
on other key activities
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