Insurance brokers: Embrace revenue automation to drive profitability
Brokers large and small often grapple with accurately predicting their future revenue.
For all the effort poured into growing a book of business and servicing accounts, surprisingly little time is devoted to ensuring commission from those policies hits the general ledger.
In fact, CFOs and COOs of large insurance brokers often say that underpaid and missing commissions along with the expensive manual cost of processing revenue can eat into more than 5% of their net revenue.
Historically, this problem has been incredibly complex to tackle. Each month, direct bill statements arrive in hundreds or thousands of varying formats, including snail mail, PDFs and spreadsheets. In-house and outsourced teams spend hours processing a single commission statement. Then, they face the equally arduous reconciliation process of determining the corresponding policy for each transaction. This manual process is duct-taped together by tribal knowledge, legacy systems and spreadsheets. It leaves teams overwhelmed and struggling to meet month-end deadlines.
If only the challenges ended there.
Regardless of whether brokers generate $10 million or more than $1 billion in revenue, they often grapple with accurately predicting their future revenue. Even the most sophisticated finance teams still rely on extrapolating last year’s net revenue to inform their strategic planning. Many brokers express the desire to track variances, but lack the necessary tools to do so effectively. Furthermore, they face complexities from ASC-606, 5500 disclosures, estimating future contingencies, and consolidating precise compensation data to inform carrier strategy.
It’s no surprise that broker CFOs can feel like they are flying blind.
Automation and intelligence
Until now, finding a solution to this challenge has proven elusive. However, by leveraging purpose-built revenue automation and intelligence, broker finance teams are transforming their decades-old processes to achieve operating efficiencies and greater profitability.
Revenue automation eliminates 90% or more of manual work processing and reconciling revenue between data entry, massaging spreadsheets, and managing legacy importers. With revenue automation, carrier statements are uploaded, and all commissions are automatically extracted and reconciled to policies in a broker’s agency management system, even if policy details are incomplete.
Automating revenue intake unlocks valuable compensation data by unifying the hundreds of ways carriers report key compensation details such as graded rates, per employee per month (PEPM), number of lives, overrides, fees and more.
What happens when you make these metrics reportable/? You get detail in just a few clicks. For example, you get answers to the number of lives insured with a carrier last month. Or, which account managers have the weakest account retention.
Revenue automation also is empowering CFOs and controllers to enhance profitability. The detailed, comprehensive revenue data captured is utilized by carrier relations for contract consolidation and negotiation. Service and production leaders now can analyze retention with precision. By eliminating issues related to missing commissions and revenue inquiries, the front office can concentrate on providing excellent service and driving business growth.
Additionally, finance teams can efficiently and continuously investigate variances, transforming accounting from a cost-center to a profit center with their newfound time and resources.
Leading brokerage firms including IMA, Foundation Risk Partners and Cobbs Allen/CAC are at the forefront of this transformation. Their leaders are supporting front-office investments by adopting revenue automation and intelligence, to ensure they’re paid for what they’re owed, while gaining new profitability-enhancing capabilities.
Jordan Katz is the CEO of Comulate, the revenue automation and intelligence platform built for brokers.
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