Pros and cons of commission-based incentive plans in Insurance and VERNAM solution
Commission sales plans involve paying the salesperson a percentage of what they sell. This strategy has been used for a very long time by insurance companies. Where does the money paid to salespeople come from? This is a valid question that needs to be addressed. The money paid to the salesperson usually comes from the customers. This is the reason insurance customers are charged very high premiums. This is one of the many challenges that https://www.vernam.com wants to address. They have a platform based on the blockchain technology that will enhance transparency so that customers can know how their money is spent by insurance companies. Some insurance companies use the number of sales an employee has made to determine the amount of money that will be paid to them. Incentive-based commissions simply mean that the workers have a fixed salary but they get incentives for every sale they make.
Increased sales
The main reason why companies use the commission-based system is to motivate their workers to work harder. This can be an advantage depending on the angle from which you evaluate it from. To the company, this is an advantage; workers can work more effectively if they know that they will get an additional payment. There are some workers who are motivated by passion. Such workers will always do a great job even if there are no incentives. There are, however, other workers who are motivated by money. They work for money and without the money, they won’t work. Such workers will do all it takes to get incentives. They will even use false language to convince customers to buy a certain product. Such salesmen can do a great job and the company will appreciate them more at the beginning but they may be a disaster for the future well-being of the company. If customers are duped with false language to subscribe to a service, in one way or another they will find out the truth and when they do, they will discredit that particular company. https://www.vernam.com will ensure that there is no false information given to customers and that the customers get access to all the needed information before they make a decision.
Pay tied to revenue
This is a financial advantage to the insurance company as they know they only pay after a sale has been made. This makes insurance companies to make profits because the money from the sale is used to pay the salesperson. Most sales intensive insurance companies pay on straight to commission. Managers only pay the employees after the results have been achieved. This may be an advantage to the insurance company but the salespeople go through a hard time because if they don’t sell they won’t get paid.
Unpredictable expenses
In exchange for strong revenue performance, insurance companies that pay commissions incur high costs. Commissions can, however, lead to budget challenges especially when selling on account to buyers. Insurance companies may pay for commissions after the purchase but they don’t collect the payment for a long period of time. This leads to lack of alignment in compensation and revenue.
Overaggressive approach
Most insurance companies have values. They also have a reputation to maintain. When salespeople are on the ground, they usually represent an insurance company they work for. If they lack discipline, the trait will be transferred directly to the company. Incentives sometimes motivate employees to use an aggressive approach to convert more sales. As I had already mentioned early, the aggressive approach may lead to sales but for how long will the sales last? What about the reputation of the insurance company? Incentive approach makes salespeople to use lies and hide some important information from the customers. The customers will buy the service but after sometimes, they will realize that they are being charged a lot of money as compared to what they were promised initially. This will make them question the sincerity of the company and most of the customers usually terminate their contract if they realize there are issues of trust in question. https://www.vernam.com will ensure that no customer is given false information by an insurance company insurance companies will also benefit because they will convert long-term sales.