THE PERSONAL-PRODUCING GENERAL AGENT
(PPGA) DISTRIBUTION SYSTEM
The Personal-producing general agent distribution system is one that uses personal-producing general agents to distribute products. A personal-producing general agent (PPGA) is an agent who generally work alone,is not housed in one of the company’s field offices,and engages primarily in personal production. Although most PPGAs can appoint subagents,typically PPGAs concentrate their efforts on personal production,rather than on hiring or training subagents. Subagents of PPGAs are full-time soliciting agents recruited by PPGAs and on whose sales PPGAs receive overrides. Most PPGAs receive higher commission rates on personal sales than do agents and brokers
The PPGA distribution system ,which was once considered a subdivision of the agency system,has now evolved into a system more closely aligned with the brokerage distribution system. The PPGA system was originally developed in localities with populations too small to justify the expense of maintaining a field office.In such localities,detached agents,who were personal producers,were authorized to recruit and develop sales forces as large as their finances and the size of their localities could accommodate. This approach helped fill distribution voids in isolated areas and allowed companies to expand their distribution efforts without having to incur the expenses involved in developing and operating a regular field office.
Today,most PPGAs are under contract to several insurance companies and spend most of their time selling insurance rather than building and managing an agency office. Insofar as personal production is concerned,a PPGA operates in much the same fashion as a career agent. However,instead of dealing with a branch office or general agency,the PPGA usually works with a regional office or directly with the home office
As we stated previously,companies that primarily use PPGAs to distribute their products are considered non-agency-building companies.Such companies offer PPGA contracts only to experienced agents who have proven their ability to produce quality business,and the only training the company generally provide to their PPGAs concerns the company’s products and procedures. This training is most often provided through company-sponsored seminars
The PPGA system’s primary advantage to a company is its tendency to hold down costs. Since little money I spent recruiting and training agents and nothing is paid to a PPGA sales force until they make a sale,a company using this system incurs few up-front expenses or development costs. The money saved can be used to design more competitive products,to attract more PPGAs by providing a higher compensation schedule,or a combination of both
SOLICITING PPGA BUSINESS
Companies hire PPGAs either through direct contracting or through the efforts of a Regional Officer (RO) or Managing General Agent (MGA)
Some insurers that opten to hire PPGAs through direct contracting solicit PPGAs business through advertising in the trade press and offering contracts to qualified respondents. In such situations,the company directly solicits such personnel and manages its relationships with them through home office staff. Companies can also hire or appoint a Regional Officer (RO) or Managing General Agent (MGA) to recruit and manage relationships with PPGAs. An RO works for only one inurer ,usually has an exclusive territory,and may be either a contractor or an employee,an MGA is an independent contractor and typically recruits PPGAs for a number of different insurance companies.Both ROs and MGAs recruit PPGAs in selected regions.
An RO may be housed in a field office or may work out of the insurer’s home office. The RO’s expenses are either paid directly by the insurer,or the RO is reimbursed for business expenses. Most ROs are compensated through a combination of salary and incentives,such as overrides on territorial production.
MGAs typically pay the majority of their own expenses and are compensated through overrides on the business produced by the PPGAs they appoint
PPGA COMPENSATION
PPGA compensation schedules most closely resemble those of general agents. First-year and renewal commissions and overrides are generally fully vested.
First-year commissions are usually annualized up to a maximum percentage per premium or a maximum amount per case.Although some overhead expense allowance is usually provided as part of a PPGA contract,the responsibility for managing and controlling field insurance operations rests solely with the PPGA
The PPGA does have the option of recruiting and training agents,but in most instances,is not encouraged or required to do so. Many companies also provide security benefits,such as group life and health insurance,to PPGAs who meet specified production and/or persistency requirements.
Companies also often provide PPGAs with additional non-cash compensation,such as access to WATS lines for home office communications,assistance in obtaining computer hardware and software,advanced underwriting support,marketing support in the specialty market of the PPGA,assistance with attaining professional designations,and trips to business conventions.
DIFFERENCES BETWEEN THE BROKERAGE SYSTEM AND THE PPGA SYSTEM
The primary difference between the use of PPGAs and the use of the brokerage distribution system is in the commission schedule. Most contracts used under the brokerage distribution system more closely resemble a regular soliciting agent’s contract; most contracts used under the PPGA distribution system more closely resemble a typical general agent’s contract.
However compensation earned by a brokerage general agent is generally greater than the compensation earned by a PPGA, reflecting the costs incurred by the company in maintaining an RO or MGA and through their direct soliciting of PPGA business
In addition,most companies that use PPGAs establish minimum production requirements that PPGAs must meet in order to maintain their contracts. Usually these production requirements are the same as those required to maintain eligibility for security benefits and other form of non-cash compensation. In contrast,most companies do not provide security benefits and non-cash compensation to brokers nor do companies establish minimum production requirements that brokers must meet. A company’s use of PPGAs doe not preclude the company from also using brokers. Many companies multineously use PPGAs as well as brokers and other types of ditribution systems
Sources: Life and Health Insurance Marketing(Page 436-439). FLMI Insurance Education Program Life Management Institute LOMA,Atlanta,Georgia,USARetyped by HMU Suwendi – ci-sat-070106
(PPGA) DISTRIBUTION SYSTEM
The Personal-producing general agent distribution system is one that uses personal-producing general agents to distribute products. A personal-producing general agent (PPGA) is an agent who generally work alone,is not housed in one of the company’s field offices,and engages primarily in personal production. Although most PPGAs can appoint subagents,typically PPGAs concentrate their efforts on personal production,rather than on hiring or training subagents. Subagents of PPGAs are full-time soliciting agents recruited by PPGAs and on whose sales PPGAs receive overrides. Most PPGAs receive higher commission rates on personal sales than do agents and brokers
The PPGA distribution system ,which was once considered a subdivision of the agency system,has now evolved into a system more closely aligned with the brokerage distribution system. The PPGA system was originally developed in localities with populations too small to justify the expense of maintaining a field office.In such localities,detached agents,who were personal producers,were authorized to recruit and develop sales forces as large as their finances and the size of their localities could accommodate. This approach helped fill distribution voids in isolated areas and allowed companies to expand their distribution efforts without having to incur the expenses involved in developing and operating a regular field office.
Today,most PPGAs are under contract to several insurance companies and spend most of their time selling insurance rather than building and managing an agency office. Insofar as personal production is concerned,a PPGA operates in much the same fashion as a career agent. However,instead of dealing with a branch office or general agency,the PPGA usually works with a regional office or directly with the home office
As we stated previously,companies that primarily use PPGAs to distribute their products are considered non-agency-building companies.Such companies offer PPGA contracts only to experienced agents who have proven their ability to produce quality business,and the only training the company generally provide to their PPGAs concerns the company’s products and procedures. This training is most often provided through company-sponsored seminars
The PPGA system’s primary advantage to a company is its tendency to hold down costs. Since little money I spent recruiting and training agents and nothing is paid to a PPGA sales force until they make a sale,a company using this system incurs few up-front expenses or development costs. The money saved can be used to design more competitive products,to attract more PPGAs by providing a higher compensation schedule,or a combination of both
SOLICITING PPGA BUSINESS
Companies hire PPGAs either through direct contracting or through the efforts of a Regional Officer (RO) or Managing General Agent (MGA)
Some insurers that opten to hire PPGAs through direct contracting solicit PPGAs business through advertising in the trade press and offering contracts to qualified respondents. In such situations,the company directly solicits such personnel and manages its relationships with them through home office staff. Companies can also hire or appoint a Regional Officer (RO) or Managing General Agent (MGA) to recruit and manage relationships with PPGAs. An RO works for only one inurer ,usually has an exclusive territory,and may be either a contractor or an employee,an MGA is an independent contractor and typically recruits PPGAs for a number of different insurance companies.Both ROs and MGAs recruit PPGAs in selected regions.
An RO may be housed in a field office or may work out of the insurer’s home office. The RO’s expenses are either paid directly by the insurer,or the RO is reimbursed for business expenses. Most ROs are compensated through a combination of salary and incentives,such as overrides on territorial production.
MGAs typically pay the majority of their own expenses and are compensated through overrides on the business produced by the PPGAs they appoint
PPGA COMPENSATION
PPGA compensation schedules most closely resemble those of general agents. First-year and renewal commissions and overrides are generally fully vested.
First-year commissions are usually annualized up to a maximum percentage per premium or a maximum amount per case.Although some overhead expense allowance is usually provided as part of a PPGA contract,the responsibility for managing and controlling field insurance operations rests solely with the PPGA
The PPGA does have the option of recruiting and training agents,but in most instances,is not encouraged or required to do so. Many companies also provide security benefits,such as group life and health insurance,to PPGAs who meet specified production and/or persistency requirements.
Companies also often provide PPGAs with additional non-cash compensation,such as access to WATS lines for home office communications,assistance in obtaining computer hardware and software,advanced underwriting support,marketing support in the specialty market of the PPGA,assistance with attaining professional designations,and trips to business conventions.
DIFFERENCES BETWEEN THE BROKERAGE SYSTEM AND THE PPGA SYSTEM
The primary difference between the use of PPGAs and the use of the brokerage distribution system is in the commission schedule. Most contracts used under the brokerage distribution system more closely resemble a regular soliciting agent’s contract; most contracts used under the PPGA distribution system more closely resemble a typical general agent’s contract.
However compensation earned by a brokerage general agent is generally greater than the compensation earned by a PPGA, reflecting the costs incurred by the company in maintaining an RO or MGA and through their direct soliciting of PPGA business
In addition,most companies that use PPGAs establish minimum production requirements that PPGAs must meet in order to maintain their contracts. Usually these production requirements are the same as those required to maintain eligibility for security benefits and other form of non-cash compensation. In contrast,most companies do not provide security benefits and non-cash compensation to brokers nor do companies establish minimum production requirements that brokers must meet. A company’s use of PPGAs doe not preclude the company from also using brokers. Many companies multineously use PPGAs as well as brokers and other types of ditribution systems
Sources: Life and Health Insurance Marketing(Page 436-439). FLMI Insurance Education Program Life Management Institute LOMA,Atlanta,Georgia,USARetyped by HMU Suwendi – ci-sat-070106
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