More than a 1,000 insurance agencies nationwide responded to the 2007 Agency Salary Survey published in the March 12, 2007, issue of Insurance Journal. While Insurance Journal published the survey results in its annual exclusive report, countless opinions and perspectives of survey respondents, most of whom were agency owners, were not included in the initial report.
As Insurance Journal’s official research partner, Demotech Inc. reviewed many of the survey questions and respondents’ comments to compile an analysis based on some of the best and most interesting opinions.
What is your agency compensation incentive plan based on?
A variety of answers pointed to a single criterion and corporate objective — growth. How that growth is measured seems to vary. The most frequent responses were: commission growth; gross written premium growth; and policy growth.
Other responses focused on a particular type of growth: renewal retention; new production; and cross sales.
Other agencies appeared to have formal budgets and operating plans. In these agencies, the incentive plan was based on the following: overall office production; performance to budget; agency profit and loss; agency profitability and individual performance; and as a percentage of corporate profitability.
Some agency owners utilized qualitative criteria that may have been intended to facilitate other objectives: team service matrix; cost reductions; individual merit; length of service to the company; and quality.
Employee benefit options and incentives were equally diverse and imaginative
In response to a question related to employee benefit options, the following were presented as benefits to employees:
• Health savings accounts
• Paid trips
• Paid health club memberships
• Simplified employee pensions
• Education reimbursement
• Section 125 plans
• Short term disability, vision and dental and health insurance
• Identity theft protection
• Free soda, beverages and lunches
• Pet insurance
• Educational trusts for the children of employees
• Company vehicle
• Adoption assistance
• College scholarships
• Medical reimbursement for uncovered health insurance expenses
• Cell phone and automobile expense reimbursement and;
• Continuing ed expense reimbursement.
Other benefit structures were lean. One person reported the agency provided Social Security and workers’ compensation insurance at no cost. Others indicated that the agency was too small to provide benefits.
Owner and management compensation offered in addition to salary
Cash bonus was the overwhelming response. However, some of the other responses were enlightening and specific, including: subject to profitability; 35 percent of the commission from his/her clients; 50 percent of agency profit-sharing and contingent commission; 5 percent of revenue; and stock options or employee stock ownership plan contributions.
However, not all owners received compensation in addition to salary. Some of the responses included “I am on straight commission” or “my compensation is based on production.”
Carrier and regional differences
General comments regarding agency compensation focused on changes in carrier practices and regional differences in market conditions. Representative excerpts included:
“Carriers seem to be moving their workload to agencies.”
“As we do more insurance company input, rating and policy printing, it would be nice to be compensated for both time and expenses.”
“We are continually being asked to do more (rating endorsement processing, etc.) and yet commission income is being reduced.”
“Carriers are expecting agencies to do more and more and want to compensate them less.”
“Compensation is too low for the required amount of quoting, uploading and agency reviews of new and renewal policies.”
“Companies have no loyalty to agencies or customers.”
“Companies are requiring us to do more of their work, i.e., front-end underwriting and data entry. Also, we pay the extra cost to print declarations pages and certificates that companies no longer send out.”
The unique nature of the Florida property insurance marketplace was front and center in many responses. These comments included the following:
“Florida agencies are in dire straits with large, non-commissionable fees, reduced commission and political fallout.”
“Here in Florida, companies have cut commission on homeowners and dwelling fire. The companies protect themselves at the expense of the agencies.”
It appears that the respondents to Insurance Journal’s 2007 Agency Survey anticipate the continued transition of what were previously carrier responsibilities to agencies. The transitions will impact carrier relationships, compensation arrangements and will transcend soft and hard markets.
While the management of independent agencies may appreciate the value of hard work and possess a willingness to reward efforts that generate revenue or profit, they must be realistic. They are concerned that premium growth, profits and compensation beyond base salary may be more difficult to achieve in the future than they have been in the past.
In the words of one respondent: “There should always be incentive for an agency to appropriately and accurately underwrite good business being placed with a company with whom the agency has a contract.” Amen!
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