Ten Percent Revenue Is At Stake If Commission Payments Are Not Verified
There is a high probability that many Managing General Agencies (MGAs), whether in the life, health or in property and casualty, are missing out on comprehensive commission payments. With high volumes of transactions each month, it’s quite easy for carriers to make errors when calculating payouts to MGAs. A few small mistakes here and there can result in incremental revenue loss for the MGA. The effort that goes into revenue reconciliation further adds to an MGA’s woes. There are not many sophisticated systems that can keep track of all the commissions due and reconcile the difference between expected and actual commission revenue for an MGA.
As an MGA, you can choose to either trust the carrier, or do the accounting and reconciliation yourself. But both these options would likely keep you tossing and turning at night. The first because of the anxiety of just not being sure you’re getting paid what you’re owed, and the second because of the tedious effort it would take to do the calculations yourself to be sure you are.
Imagine how good it would feel to be able to model your carrier’s compensation schemes just once; and then sit back and relax knowing that you can easily and automatically run your own verifications.
One managing general agency did just that, and the results speak for themselves.
A top U.S. provider of employee and retiree benefits recently experienced difficulty confirming the accuracy of a carrier’s payments. This provider sells thousands of policies through Medicare Advantage. The organization’s high business volume created numerous receivables to track.
“We had $40 million in receivables this year, and 150,000 unique enrollments, which means there’s a massive amount of transactions per month,” said a spokesperson for the MGA. “The capacity for error is huge.”
Using VUE Compensation Management, the MGA was able to forecast commissions and reconcile the difference between expected and actual commission revenue. The MGA discovered that an additional 10 percent of revenue had been missing due to carrier error. In all likelihood, this amount would never have been recovered otherwise.
“It takes so much time to manually calculate how much we’re owed. Visibility is severely handicapped without a system like VUE Compensation Management,” said the spokesperson. “We find errors in commissions every day—maybe the carrier is using the wrong comp table or not paying on a policy at all. It’s so clear that we’re being underpaid.”