Second Class Dollar

Heard today that I may not be going for our regional product class conference after all.  Seems like senior management is not happy with the fact that even though my department has almost hit our very high budget for the year, the income we earned is considered inferior because it’s mainly "non-renewable" income.

We have 2 types of income class – renewable and non-renewable.  Renewable income is brokerage earned from the placement of policies that are renewable.  This would be things like your property insurance, fire insurance, liability insurance, etc.  As long as the building stands, you need to insure it. 

Non-renewable income is generated from "once off" policies, which "unfortunately" forms the bulk of the policies I place.  The reason is because my product line covers insurance for offshore loans into emerging markets.  Thus, just as loans are not renewable (you won’t ask to renew a loan after you’ve finished paying off the instalments right?), the insurance that cover these loans are also non-renewable! 

Senior management has a strong preference for renewable income as they as it as being stable earnings for the company.  I beg to differ.  If one always relies on renewable income, it also means that you’re extremely reliant on your existing portfolio of client.  Piss the client off and you lose a % of your business.  Another broker pleases the client more, you’re screwed too.  On the other hand, if you have the ability to bring in an on-going stream of new business (albeit non-renewable), your focus and strength is then expanding the portfolio of clients.  Isn’t this better than clinging onto your existing clients and praying hard that they don’t defect?

The saddest part about the whole thing is that it shows that senior management doesn’t understand my product line.  Because if you had even a rudimentary grasp of the nature of the product line, then you would also understand why it’s not logical to have renewable income.  The fact that my department probably has the highest brokerage earned per employee basis in the specialty division (and possible the entire company) should count for something.  Don’t look down on my non-renewable dollar.