I don’t know about you, but we keep a close eye on our placement ratio here. In my mind a lot is determined by our placement. (By the way, we also like to refer to it as lives protected.) One way placement ratios are used is to measure the quality of your performance. It is a simple concept really. If neither you nor we can get policies placed because of the quality of the field underwriting, the placement will be down and your income will fall with it. To get a better understanding, let’s break down how to find your placement ratio.
How to calculate placement ratio:
First, it is important to understand that quantity does not equal quality.
If you submit 10 cases but only eight cases have been placed and made it past the free look period (typically 30 days, but some states and products may vary), you take the number of placed cases over the number of submitted cases and divide.
8 Placed Cases = 80% Placement
10 Submitted Cases
Again remembering quantity does not equal quality, say you increase your submitted cases to 100 but you are only able to place 70 cases. That brings your placement down to 70 percent.
Let’s break this down to dollars.
Say your average case has a $2,000 annual premium. If you are getting 80 percent commission on those cases, you earn $1,600 per case.
Taking the example above and going back to our 100 cases submitted in any given year, if you were to place 100 percent of that business, you would earn $160,000. If you placed 80 percent of that business you would earn $128,000, losing $32,000 that year. Don’t get me wrong, 80 percent placement in the industry is not bad! One major carrier told me their life placement was 68.2 percent. A common measure which we use for setting goals is 70 percent. If you meet that goal, your income just dropped by another $16,000 for a total of $48,000 lost for the year. Annual earnings then would be $112,000. Breaking it down even further, if you work a 40 hour week, your hourly income went from $61.54 per hour to $53.85.
Part of the point to all this is that the time you take to submit that 20 or 30 percent that is not getting placed is costing you time and money! Making sure you spend time prior to submission of an application can save you money if the insured does not qualify or their expectations in the process are not met. How do you make sure everyone is happy from the beginning to the end of the life insurance benefit process and improve your placement ratio?
1. Know their medical history. Make sure you ask them about their medical history to provide a proper rate classification when giving them the cost for their life benefits. Most BGAs will have questionnaires available if you need help with this. Send the history to your BGA to shop your case and provide your client with the best tentative offer.
2. Set proper expectation. According to a LIMRA study, seven in 10 people feel, once they have applied, they should have their policy in 14 days or less. Buying life insurance is not a quick process. It is getting better for smaller term cases, but on average the process can take four to eight weeks. Make sure your clients know that and the steps they will be going through to get the coverage.
3. Include a cover letter with your application.
4. Make it affordable. Your client may want and need a million dollar policy, but if it is not affordable they are going to have buyer’s remorse and not take the policy even after going through the process.
5. Know what to do if your client gets a rated classification. I just cringe every time a case gets rated unexpectedly because the health history was not known up front and then the unhealthy client does not take the coverage—either because they are upset because of the rating or because of the cost. They are the ones that need it the most. Congratulate them on being able to get the coverage. Explain to them the increased need for coverage and that having the coverage is more important because of their health history. If the cost is an issue, adjust the benefit amount or, in the case of term, adjust the level premium period. You may even consider laddering coverage to help control the cost.
Keeping your placement ratio high is an important part of not wasting your time. Just a few extra minutes on the front end of a life insurance sale can keep you in the money!
