Generating Wealth – A Six Year Snapshot
The Path to Validation – Building a Book of Business
A “book of business” refers to the entirety of policies that an insurance producer manages, which includes all the policies sold to clients, as well as any renewals or newly written policies. It represents the value of the producer’s ongoing client relationships, and serves as a basis for their compensation. The goal for successful producers is to develop a stable book of business at or above $1m.
There is no guaranteed timeline for building a $1m+ book of business. Some producers move at an accelerated rate by working long hours and pushing themselves to achieve results in less than six years. For other producers who aren’t as self-motivated, it may take longer to hit this benchmark. This slide breaks down a realisitic six year timetable to growing a $1m+ renewable book of business. It shows steady new business growth year over year and a 90% retention rate.
Non-Validated Producer Compensation Schedule
A non-validated producer is compensated with a guaranteed base salary and some form of first year commission on new business produced. The base salary and the first year commission shown in this slide are for illustrative purposes only and will vary according to your sales experience and the agency/brokerage you represent. In this slide, a non-validated producer has sold enough business to move to straight commission by the end of their third year.
Validated Producer Compensation Schedule
A validated producer earns commission on all new (first year) business produced and all retained (renewal) business. The new and renewal commission shown in this slide (40% new/25% renewal) are standard in the industry but are still for illustrative purposes only. New and renewal commissions will always vary according to the agency/brokerage you represent. As shown in this slide, this validated producer’s compensation has nearly tripled from their initial base salary, based on the total book of business.
Producer Compensation
Now that you understand how a producer builds a book of business and transfers from a guaranteed salary to straight commission, you will want to understand how the compensation structure works in commercial insurance. Click HERE to understand the compensation process and the goal of writing large commercial insurance accounts.
