Take the Cost Out of Compliance at Your Insurance Agency

No one ever promised that operating an insurance agency would be “cheap.” But if you work at an agency in any capacity – from owner, to finance, to operations, or sales – you’re undoubtedly feeling the squeeze of higher and higher costs (thank you, inflation!) while growing economic uncertainty puts a large question mark over your revenue predictions for the coming year. 

As independent insurance agencies continuously try to do more with less, automating regulatory compliance can be a winning cost-savings strategy. 

Why is insurance agency compliance expensive? 

Tracking each individual producer’s license status across resident and nonresident states, and across each line of business they sell, is a time-consuming and manual process. Multiply this complexity by the number of producers you’re managing, and their compliance needs across every up- and downstream business partner, and you can throw “easy” out the window. 

Someone at your agency has to understand the nuances of insurance regulations across states and lines of authority, then keep up with ever-changing regulatory requirements. This role requires significant tenure and expertise within your team and has typically meant insurance agencies need dedicated, specialized staff for this purpose. 

Finding and keeping dedicated compliance staff becomes a challenge in an industry already facing a talent shortage and a mass retirement wave. Attracting and retaining people whose main purpose is to cross reference spreadsheets, PDFs, and state departments of insurance websites is a losing proposition in 2023. 

Even if finding people to do the job isn’t your issue, if your agency has people doing the labor-intensive work of manually tracking producer compliance, that’s headcount on your payroll who aren’t generating revenue. They’re not even doing revenue-supporting work like building client relationships. 

The work they do is extremely important and legally required to keep your producers selling. But they’re spending entirely too much time on compliance monitoring, compliance management, and license verification – all of which could be automated with better results for everyone. 

How much is manual compliance management costing your agency? 

Probably more than you realize. You have to consider costs both in terms of dollars and cents, and in other less tangible ways, like wasted time, regulatory risks, and staff attrition. 

The cost of wasted human effort

How many humans does your agency need to manage your producer licensing and compliance? For each of those administrative employees, you’ve got to pay for salary, benefits, taxes, (potentially) office space, equipment, and many other hard costs. 

If its not entire positions dedicated to managing compliance, you might have producers or other people who could be doing more valuable work, spending a percentage of their time on compliance-related tasks. Regardless of whether it’s entire roles dedicated to something they don’t have to be, or people spending what should be valuable revenue-generating time on administrative tasks, wasted human effort is a huge compliance cost. 

And for all that cost, what your agency gets in return are people doing things that could be automated and done in way less time. Think about what those people could be doing to bring in clients, build client relationships, expand your services into new markets, and much more. If only they weren’t spending so much time to manually tracking producer compliance. 

The cost of recruiting and retaining employees 

Employees these days have more choice over where and how they work than ever before. If your organization isn’t putting systems in place that make your employees’ jobs easier, less tedious, and more efficient, then you’re going to lose out on the best talent to companies that are. 

The cost of replacing an employee is estimated to be anywhere from $1,500 on the low end for an hourly employee to over 200 percent of their salary for C-level executives. When your company doesn’t implement modern technology to make your employee experience truly exceptional, you risk losing everyone from the producers you rely on to sell, to the compliance managers who oversee producer licensing, to the customer service representatives who service your clients’ policies, and many others. 

No one likes repetitive tasks with a high probability for errors. But if everyone in your organization is subject to old fashioned processes that reinforce information silos, multiple and conflicting sources of information, and mind-numbing repetition, the odds of attracting and retaining the best talent are slim. 

The cost of stagnant growth

Your agency’s growth goals might include onboarding new producers to sell new lines of business in new geographic markets with new carrier partners. But how many more compliance staff will you need to do this without risking landing in regulatory hot water? And how much will that cost? 

If you can’t shoulder the added cost of exponentially more dedicated compliance staff, you might have to put those growth plans on hold. Meanwhile, competing agencies that have already automated their producer compliance can scale at a speed you can’t even fathom and capture marketshare and carrier relationships that you’ve left on the table. 

The cost of risk

Managing producer licensing and compliance on paper, with spreadsheets, or by any other manual and human-based method is full of risks. 

The more complex your compliance picture, the more risk is involved. What seems reasonable for an insurance agency with 50 producers working in one or two states and with only a few carriers quickly becomes a minefield of risks when it grows to 200 producers working across all 50 states with 15 insurance companies. A common mistake agencies make is not planning for the compliance impacts of that kind of scale and growth in their early stages, leaving them in a crisis state when they grow, or simply unable to grow at all. 

When you consider the risks of doing things the way you’ve always done them, consider each of these elements: 

Compliance risks: What are the chances that one of your producers has a license that’s expired in one of the states they’re currently selling in? Do you know with 100 percent certainty that every producer in your distribution channel is properly licensed in every state and appointed with every carrier both when they sell and when commissions are paid? 

Security risk: How secure is your and your clients’ information? Are you storing personal identifiable information? What types of information security protocols are in place? Have you invested in best-in-class information security measures and training for all staff? What are the chances someone has access to information they shouldn’t have, or that secure information is being kept in unencrypted documents – or even on someone’s desk? 

Reputation risk: What would it cost to repair your reputation if your organization made headlines because of a compliance misstep or security breach? Have you considered the financial ramifications of not only immediate legal defense, but public relations work and lost business from customers or investors who decide to leave after a public incident?   

The cost of lost distribution channels 

On top of being unattractive to internal talent, manual compliance management can make your organization an unappealing partner to the up- and downstream distribution partners you need to fuel your growth. 

Without insurance carriers, you have no products to offer your clients. And if your internal processes make it hard for carriers to get their insurance business in front of consumers, or present risks the carriers aren’t willing to take, then you’re going to be hard pressed to sell policies. 

Without producers, you may have products to sell, but sales don’t just “happen.” If your internal processes make it hard for producers to get onboarded and selling quickly, they’ll choose to take their talent elsewhere and work for an agency that enables them to do more, faster, and frictionlessly. 

Each of these risks comes with real financial costs. With the economic outlook in flux, and businesses looking to save money in case a looming economic recession materializes, these costs aren’t ones you want to leave to chance. 

How much does compliance automation cost?

To answer this question, you’ll have to look at your current costs versus the cost of implementing an automated producer compliance management solution. We predict, when you look at the full picture, that the cost of the right solution will be less than continuing to do things the way you’ve always done them. 

While you’ll have to pay for a solution, to be sure, the savings you’ll get back when you let your staff devote time to revenue-generating activities that they want to be doing (not tedious tasks they’d rather not be doing) will pay dividends. 

We can’t tell you exactly what your ROI, or the resulting true cost of automating compliance for your agency will be (unless you speak with one of our team members about your specific situation!). But here are a few hypotheticals to consider. If your agency is in a similar situation to any of these, you can do some ballpark math to calculate your ROI.

1. Your agency has 10 producers who spend an average of one hour daily on administrative work related to their many state licenses and carrier appointments, tracking continuing education credits, renewal deadlines, etc. These same producers could call five new leads, or quote three prospects, or consult with a client about an upcoming renewal, or close a new deal in that same hour. How much are you spending when you have producers sending emails and checking in on their licenses instead?

2. Your agency just onboarded five new, highly promising producers that came from other agencies with proven track records. Your recruiting team spent months trying to entice them away from their prior agency, and your current team spent hours upon hours in meetings and interviews to get the producers confident your agency was the right fit. Now, it’s taken four weeks (and counting) to get their licenses and appointments set up so they’re ready to sell. The new producers are frustrated, not making any money, and costing your agency money every day they’re sitting in license limbo. In a worst-case scenario, this might be enough to make them reconsider their decision to join your agency at all. 

3. Your agency has two tenured employees managing producer licensing and compliance manually by cross-referencing spreadsheets and various state DOI websites. One of the employees is close to retirement and finding someone to fill the position is going to be nearly impossible with the current state of insurance talent. In the meantime, the non-retiring employee can’t possibly double their workload. Would the cost of automating the bulk of manual compliance tasks be worth it to relieve someone of tedium so they can focus on the work that only they can do, without the cost (in both time and money) of finding and training a replacement for the retiree? 

“I can manage all of our licenses by myself. I wouldn’t be able to do that if not for AgentSync, or I would work 100 hours a week and I would still be behind. The system is just very manageable and so easy.”

• Carrie DeHaven, Director of Agency Operations at EverQuote

The cost-savings of real-time automated insurance regulatory compliance 

Welcome to 2023. We don’t know what the future holds in terms of the world economy, but we know insurance will always be vital to making it run. 

As you navigate the economic uncertainty of the coming year, faced with the constraints of tightening budgets, less headcount, and ever-growing revenue goals, you may want to look at the cost-saving benefits of real-time, automated, producer compliance solutions. 

If you aren’t using technology to support your team’s efforts, you’re wasting time and money investing in manual compliance management. Instead, focus on integrated solutions that automatically add and update regulatory requirements, and plug in accurate producer compliance throughout all of the workflows required to do business. 

Ready to see how much money your agency could save by automating compliance and letting your humans do more valuable work? Download the Guide: 10 Ways Agencies Can Make Compliance a Cost Saver to learn more about what to look for when you’re trying to automate producer license compliance for maximum cost savings. 

Key Takeaways: 

• Insurance agencies are trying to balance staying in compliance with shrinking budgets, increased revenue goals, producer and staff recruitment and retention, and an uncertain economic outlook. 
• Compliance is a  costly undertaking for insurance agencies and requires dedicated, highly-experienced in-house staff to execute correctly – or, the burden of additional, wasted hours of manual effort on the part of staff that aren’t dedicated to compliance. 
• The way insurance agencies have managed producer compliance historically is manual, tedious, and error-prone work that doesn’t lend itself to what employees and producers expect in terms of speed, ease, and efficiency. 
• Continuing to manage compliance the same as you always have creates risks both in terms of hard financial costs and in other areas like reputation and information security. 
• Insurance agencies can dramatically reduce the financial cost of compliance along with many of the other risks you’re currently facing through real-time automated compliance solutions.