It is virtually unanimous: nothing beats a little incentive to help get the job done. Whether it’s a swanky free lunch or a decadent trip to the Bahamas, there’s little doubt that rewards are an appreciated perk for insurance agents.

The question is: what kind of incentive works best in the insurance industry? More important, should incentive programs even exist? For Investment Executive‘s Insurance Advisors’ Report Card, we asked insurance advisors across Canada what they thought of the incentive program structure offered by their company or MGAs, and whether they thought it should be based on total production or specific product sales.

By far (69%), the preferred approach was rewards based on total production, while a small number (6%) felt they should be rewarded for specific product sales. But 11% said they didn’t agree with incentive programs at all.

“Unfortunately, the industry doesn’t look out for the interests of the consumer,” says an Ontario-based independent agent, citing his objection to incentive programs. “Just pay me cash. Forget about the gimmicks,” agrees an Alberta-based Equinox Financial Group agent. “I don’t believe in incentives,” says a State Farm Life Insurance Co. representative in Ontario. “Commissions and doing the right thing for your clients should be incentive enough.”

But incentives do exist, of course. Advisors at Waterloo, Ont.-based Clarica Life Insurance Co., for example, are offered incentive programs both at the branch level and company-wide. Four times a year there are various “campaigns” based on a combination of specific product sales and total production: an RRSP campaign, a spring campaign, a summer campaign and a fall campaign.

When agents meet their specific targets, they receive recognition points toward prizes ranging from cars (for a handful of top producers) to Palm Pilots and barbeques.

At the branch level, incentive programs at Clarica are usually based on total production on a quarterly basis. When advisors meet a certain level of production, they’re rewarded accordingly. “It’s just a little extra,” says one Ontario Clarica agent. “People perform just a little bit better.”
After a two-year qualification period, advisors producing in the top 15% qualify for a convention, which takes place every other year.

But the programs inevitably raise an ethical question: if agents are working toward a sales goal, are they keeping the interests of their clients in mind?

It’s an issue some agents acknowledge. “I always have a problem with these incentive sales,” says an Ontario agent at Great-West Life Assurance Co. “Reps lose sight of the clients in chasing the promotion. It can also blur the line of who’s really paying your cheque. It makes you think it’s the company, not the client.”
A British Columbia-based Clarica agent thinks otherwise. For her, it’s not about being rewarded with extravagant gifts and getaways — although they certainly have their appeal — but about being consistent in the way she runs her business.

“The programs are a good incentive to keep going,” she says. “Once you’ve reached a certain level, you don’t want to go back.” The bi-yearly President’s Conference in Hawaii for Clarica’s top producers is a perfect example of a reward that fuels continued productivity.

“People who go to those conferences don’t just go once,” she says. “Once they achieve something like that, they keep achieving.”

Jack Garramone, vice president of independent career advisors at Clarica, says incentive programs are really for the benefit of the client. “Sadly, most people are dramatically underinsured,” he says. “If I told an advisor that over two years he could qualify for a conference and if he made an extra couple calls a week, then he deserves to go,” he says. “The person best served by that is the client.”

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Ethically, Garramone has no qualms about incentive programs because the structure is compensation based on productivity.
Equinox’s incentive program is based on total production, not just productivity with any one insurance company. This year, top producers qualified for a conference in Barcelona.

“Some of our associates actually feel better about going to these conferences because it’s based on total production,” says Karen Sparks, vice president of investment marketing. “We don’t tell them which company to sell.”

But while Equinox’s incentive structure is based on total production, that’s not always the case everywhere else. Sparks recalls an associate who declined an offer to attend an extravagant conference because it was a reward based on his sale of a specific product.

“Ethically, it’s an issue for some people,” she says.

Incentive programs have been eliminated in the mutual fund industry, but Sparks doesn’t see the same thing happening in insurance.

“No one wants to be the first to say, ‘We’re not having a conference this year’,” she says. “We don’t want to lose business to our competitors.” (And insurance agents take note: most “free” conferences come at a cost; expect a T5 slip in the mail in time for tax season.)

For some agents, however, incentive programs are not a motivating factor in the least. “If they sell it, they sell it,” says a Clarica agent. “If they don’t, they don’t.”
David Barber, president of the Independent Financial Brokers of Canada, is one of those people. Incentive programs are largely irrelevant in the long run, particularly for agents whose business is spread among several insurance manufacturers, he says.
So what’s his incentive? “Get the best product and put the client first,” he says. “If we do that, it never comes back to bite us.” IE</br