In this unit, we will learn to calculate payouts for each producer. We’ll cover commission schedules and formulas, the basics of transactions and the process of bringing transactions into APM . Next, we’ll cover the Payout process and the associated steps. We’ll then move into processing vouchers and the details of the voucher task. We’ll finish up this topic with statements, extracts, and reporting.
Managing Commission Schedules
Objective
After completing this lesson, you will be able to create a Commission schedule.
Introduction to Commission Schedules
Commission Schedules
Commission Schedules, or Schedules, are an important building block for any APM Configuration. A Schedule is a group of rules that is used to enforce the compensation agreement between the client and the broker. Think of a schedule like a compensation plan at the heart of the APM commission system: without a schedule, a payee cannot be compensated. There are a several concepts that are common to all commission related processing.
While the underlying details will vary by organization, the primary commission drivers are common to most commission system processing. These include the major business entities involved in a transaction and the resulting generation of commission payment(s).
A schedule typically consists of one or more Schedule Grids and one or more Formulas.
- A schedule grid is a single compensation rule that defines the field values that will be compared to the transaction to locate the best match. All the schedule grids associated with a schedule will be searched until the best match is identified. Once identified, the formula on that Schedule Grid will be used to compute the commission amount.
- A formula is the specific computation method that results in a commission rate. APM allows a several different ways to calculate in a formula, such as split, flat, tiered, and expression. Formulas can be associated with either a schedule detail or a schedule grid.
Schedule Types
Schedule Types determine how the best matched compensation rate will be identified. The three schedule types are Grid, Match Rules, and Weighted.
Match Rules indicates that the transaction must exactly match the match rule(s) assigned to the sequence in order for that sequence to be used.
Grid indicates that the field values on the transaction will be compared to the field values on each schedule grid in order to locate the schedule grid with the greatest number of matches. If multiple schedule grids match on the same number of field values, the schedule grid with the lowest sequence will be used. No field has a higher priority than another.
Weighted indicates that the field values on the transaction will be compared to the field values on each schedule grid in order to locate the schedule grid with the highest priority match. If this Schedule Type is selected, the client must also specify the fields that will be used to locate the best matched Schedule Grid. The order in which the fields are defined on the Schedule Master will determine the field’s priority (weight value). The field at the top of the list has the highest priority, while the field at the bottom of the list has the lowest priority. The field’s weighted value doubles for each field listed from lowest to highest.
Assigning Schedules
A schedule can be assigned to a number of entities, including the Customer, Policy, Customer Ownership, Broker, or Broker Detail. The most efficient entity on which to assign a schedule is the Broker Detail.
Let’s look at an example. SafeCare Insurance has an agreement with its brokers in which standard commission for a group policy is 5%, while commission for an individual policy is 8%. To make this work, we would first create a formula for each type of policy. We would then create a schedule that uses a match rule to determine which formula to use. This schedule would be assigned on the Broker Detail for SafeCare Insurance.
Create Basic Formulas
Business Example
In this exercise, we will create two formulas that will determine the commission for individual and group sales in California.
Steps
Create a basic formula.
From the Manager portal, select Payment Plans→Formula Search.
Select Add (+).
Enter the Formula ID: F_Group_CA_Rate.
Enter the name: Group California Rate Formula .
Select Save.
Enter the formula details
In the Formula Detail section, select (+).
Enter the following details
- Effective date: 01/01/2025
- Type: Flat
- Commission Basis: Premium
- Commission Percent: 5%
- Payout Rate Type: Fixed
- Payout Rate: 100
Select Save.
Select Close.
Use the same steps to create a formula called F_Ind_CA_Rate that pays a flat 8% rate for Individual policies.
Create a Commission Schedule
Business Example
In this exercise, you will create a commission schedule that will use the formulas we created in the previous exercise. This schedule will include two match fields: State and Business Type. These will allow us to return the correct formula depending on the state, and whether the Business Type is Group or Individual.
Steps
Create a new schedule called STANDARD.
From the Manager portal, select Payment Plans→Schedule Search.
Select + to add a new schedule.
Enter the following information for the new schedule:
- Schedule ID: STANDARD
- Name: Standard
- Schedule Type: Weighted
- Hierarchy: Agency
- Hierarchy Schedule: Writing Agent
Add State and Business Type as the Match fields.
- In the Schedule Match Fields search box, type State.
- Select the right arrow to move the State field to the right column.
- Repeat this step to add the Business Type field to the right column.
Select Save.
Add a rule that returns the F_Group_CA_Rate formula if the Business type is Commercial Group and the state is California.
Select the Schedule Rules tab.
Select (+) to add a new rule.
Enter the following information in the new rule:
- Seq: 10
- Eff Date: 1/1/2025
- State: California
- Business Type: Commercial Group
Assign the F_Group_CA_Rate formula to the rule.
- Select the icon next to the Formula ID field.
Select Save.
Select the Schedule Rules tab to return to the list of rules.
Repeat these steps to add a second rule that returns the F_Ind_CA_Rate if the state is California and the Business Type is Commercial Individual.
Activate the STANDARD Schedule.
Return to the Schedule Master.
Select Activate.
Assign the STANDARD Schedule to Max Martinez.
From the Manager portal, select Producers - Agents.
Search for Producer ID MM-001 (Max Martinez) and open the record.
Select the Producer Details tab.
In the Results section, populate the Schedule ID with STANDARD.
Select Save.
Summary
- A commission schedule is a group of rules that is used to enforce the compensation agreement between the client and the broker.
- A schedule consists of grids and formulas.
- A schedule grid is a single compensation rule that defines the field values that will be compared to the transaction to determine the best match.
- A formula is the computation method that results in a commission rate.
- Schedule types determine how the best matched compensation rate will be identified if more than one matches are made. Options are Grid, Match Rules, and Weighted.
- A schedule can be assigned to a customer, policy, customer ownership, broker, or broker detail record.