Firing and hiring employees is expensive—especially for those in the insurance producer business. And while commission income is growing and expected to grow through the end of this year, a new financial outlook survey from MarshBerry found that employee turnover is the one dark spot on the horizon.
More than 60% of independent insurance agencies told MarshBerry they planned on hiring new employees in 2014, indicating good economic times ahead. However, a November 2012 study from the Center for American Progress found that for positions earning less than $75,000—including most insurance producers—the cost of firing and hiring a new employee was roughly 20% of that position’s salary.
According to the Bureau of Labor Statistics, the mean annual salary for insurance agents was $47,450 in 2011. That means replacing the average employee would cost an insurance agency roughly $9,490.
That massive financial disincentive is due to significant recruiting fees, as well as licensing and training costs. Hidden costs also have a role to play, including the skill level of the previous employee and the lower productivity of the new one.
Unfortunately, new employees don’t always make up for those high turnover costs. The MarshBerry study reveals that 52% of employees terminated in 2012 were also hired in the previous three years.
To find the right employees, one producer suggests hiring potential candidates as paid interns first.
“We’ve been doing a lot of hiring, hiring into junior positions,” said John Belyea, COO at Moore-McLean Insurance Group Ltd. “And we’ve found that hiring three summer interns each year is a great way to expose college kids to insurance, because getting good people is as important as getting clients these days.”
Belyea said an internship is akin to a test drive for both the employer and the potential employee, limiting potential employee turnover further down the road.
“One summer student we hired on full time this year, and at the start, they had no interest in insurance,” he said. “It isn’t just smart business practice for us, it is good for them as well.”
You may also enjoy: "Failure to address this question may sink your merger deal"
"The social media tool bringing in the most producer profits"
"How new insurance agents can overcome the 'too young' objection"