Top 4 Challenges Insurance Agencies, IMOs, and FMOs Face with Producer-to-Carrier Contracting
For agencies, MGAs, MGUs, BGAs, NMOs, IMOs, FMOs, and the rest of the alphabet soup of wholesalers and insurance resellers, connecting producers with carriers for the contracting and appointment piece of the business is vital and risky. Done well, you’ve proved your worth as a middle man to both ends of stakeholders. Done poorly, you risk producer churn and reputational floundering with the carriers whose exclusive contracts you hope to obtain.
Managing contracts is difficult on a good day. You may have producers assigned to different strata of contracts depending on the carrier or sales region, and keeping clauses up-to-date at scale as carrier appetites change or producers write more or less business is like a neverending shell game if you’re doing it manually. And the more complex your business becomes, the worse it gets.
4 challenges to insurance distributors contracting at scale
Whether you’re starting a new relationship with an insurance carrier and need to onboard all your agents to your new partner, or whether your newest recruiting class is signing up with a longtime carrier partner, getting producers contracted and appointed can be one of the hardest and most bottlenecked pieces of the onboarding process.
We’re going to cover the top four reasons this process is a challenge, but they all come down to the fundamental of control: For agencies, FMOs, and other insurance distributors, even if you’ve dialed in the rest of your onboarding, handing your producers over to external carrier stakeholders means sending them into a process that’s outside of your control.
No. 1: Nonstandardized data
One of the biggest, if not the biggest, challenges to an ideal carrier contracting and appointment process is that your insurance carrier partners don’t follow a single standard for producer data collection. This means that, whether you contract with 10 or 30 or more insurance carriers, every single one is an ad hoc motion for your producers.
Without a structured, standardized approach to the onboarding data needed for each carrier’s contracting and appointment process, each producer faces the risk of missing essential information and having to engage in the back-and-forth of a paperwork chase. From “paper licenses” to copies of E&O, managing the requirements easily becomes a trial of carrier-to-agency-to-producer-to-carrier communication.
No. 2: The black box: Where transparency goes to die
You collected your producer’s paperwork and sent it over, and now … you wait.
Does someone have your producer data sitting in an inbox? Does the carrier have all of the information they need?
Submission is a black box. Distributors don’t have the visibility to report back to the stakeholders in their organization, and the accountability for who “owns” the process is lost. Further complicating this process is that many carriers and agencies handle some portions of the contracting and appointing process quite manually. As one agent pointed out in Insurance Business Magazine, “Carriers must be transparent. If we say we offer a fully digital experience, it needs to actually be that.”
No. 3: Unpredictable timelines
For insurance distributors, the black box of producer data rolls into another challenge: Without visibility into a producer’s progress through the contracting and appointment process, you also can’t give your producers predictable timelines for when they’re ready to sell.
Many FMOs, IMOs, MGAs, and other distributors have worked to get their producer onboarding process down to a matter of hours, not days. But your efforts are undermined when you’re at the mercy of your insurance carrier. You want to assume you’re submitting only contracts that are in-good-order, but, if every one is a one-off motion, then your operations team will struggle to help set timelines and expectations with both your agents and the internal stakeholders who recruited them.
To underscore the difficulty in establishing a predictable timeline for completing the producer-to-carrier contracting and appointment process, industry estimates for carrier contracting range from a few days to several weeks.
No. 4: Trouble setting producer expectations
If you can’t offer predictability for how quickly a producer can move from onboarding to ready to sell, you may struggle to retain your producers, something that’s already a pain point for many distributors, as 30 percent of agents quit in the first 90 days of joining the industry and 90 percent leave within the first three years.
While there are nearly 1 million insurance agents in the U.S., about 200,000 join or leave annually. So, unnecessary churn could spell real trouble for you and for the carrier partners you hope to attract.
When insurance producer-to-carrier contracting goes poorly
If you aren’t able to quickly and predictably add your producers to your carrier contracts during onboarding or as they change sales territories, your challenges could cascade into five very avoidable consequences:
- Lost revenue
- Increased operating costs
- Frustration and producer attrition
- Fractured relationships with carriers
- Gaps in sales coverage
Controlling your risks with better contract management
Hopefully you know that a manual process with spreadsheets and some esignature tools as a sidecar isn’t enough to cut through the hassle of the status quo. In fact, half of producers in one McKinsey survey reported being “dissatisfied with the level and function of signature capabilities at their primary carrier.”
The first step for agencies, FMOs, IMOs, MGAs, BGAs, and other insurance distributors that want to reduce friction for their agents is to rethink contracting as a shared data workflow. You’re not merely adding an agent to your carrier contract. You’re using your connection to your producers to serve as a source of truth in connecting accurate data to your carrier partner.
To see how AgentSync is helping leading insurance carriers and agencies rethink producer-to-carrier contracting, contact one of our knowledgable insurance compliance experts today.
About AgentSync
AgentSync provides distribution channel management (DCM) solutions that connect the insurance ecosystem. By automating producer onboarding workflows and integrating real-time data across systems, AgentSync enables insurers to scale and optimize their distribution networks while remaining compliant. Our configurable, intuitive platform simplifies the producer ready-to-sell process, supported by API connectivity for seamless data exchange across systems. AgentSync recognizes compliance as the ultimate enabler for efficient distribution, unlocking new revenue opportunity and agility to adapt in a rapidly evolving industry. Founded in 2018 by Niji Sabharwal and Jenn Knight, and headquartered in Denver, CO, AgentSync has been recognized as one of Denver’s Best Places to Work, a Forbes Magazine Cloud 100 Rising Star, an Insurtech Insights Future 50 winner, and was ranked 65th in Forbes’ America’s Best Startup Employers 2023. To learn more, visit www.agentsync.io.