David is well deserving of this recognition. He is one of the industry leaders that understands the importance of the “agency-company” partnership and is someone who consistently places the best interests of the industry over his own. He is a low profile leader with an enormous following of agents who recognize what he has accomplished in his many years for this industry.
David is one of the few folks in the industry to call out a carrier when hostile actions are taken toward agents. When Travelers announced commission cuts to agents recently, David wrote a telling article that Travelers was not happy about. Below is the article. Kudos to David.
Starving the Cow
David VanDelinder, Executive Director
Raise rates, reduce commissions, institute a new business incentive program. Sounds like an unlikely formula for success: starve the cow to produce more milk; yet, that is what many companies are doing in property markets in Texas today. Countrywide, companies are experiencing increases in property claims frequency and severity, their investment returns are dismal and catastrophes are lurking around the corner. Agents understand the need for profitability, but cutting the lifeblood income of agents who produce that business seems like a short-term solution to a long-term problem.
Consider the economics of commission reductions. At 15 percent commission on a $1,000 homeowner premium, an agent makes $150. Reduce that commission to 12 percent and the agent’s income is reduced by 20 percent to $120. Some companies are reducing commissions to 10 percent or less on monoline property, which lowers the agent’s income by at least a third; but, some company public relations departments argue that premiums have increased as well. That’s true for a variety of reasons, including increases in Coverage A amounts dictated by carriers. A recent market report by the Texas Department of Insurance concluded that average homeowner premiums in Texas had increased 61 percent from 2000 to 2011, but during the same period cumulative inflation has eaten up at least 30 percent of that income and contributed to rising wage costs which often make up more than half an agent’s expenses. For many agents facing commission reductions next year, income on that $1,610 homeowners policy will be up only $11 over what they would have made on that policy in 2000 (at $1,000 premium) – hardly enough to make up for inflation.
Once again agents are asked to dig into their pockets to address company profitability, and this at a time when agents are struggling to gain market share from the directs and captives. For Texas agents, who live in a state where it is not all that hard to get rate increases, this makes no sense. The hallmark of independent agency business is customer service but that very service is threatened today by rising costs and reduced income. A starving cow costs less to keep, but she won’t produce more milk.
David is well deserving of this recognition. He is one of the industry leaders that understands the importance of the “agency-company” partnership and is someone who consistently places the best interests of the industry over his own. He is a low profile leader with an enormous following of agents who recognize what he has accomplished in his many years for this industry.
A well deserved honor to one of the outstanding leaders in the insurance business in Texas.
Congrats David.
Rick Gentry
David is one of the few folks in the industry to call out a carrier when hostile actions are taken toward agents. When Travelers announced commission cuts to agents recently, David wrote a telling article that Travelers was not happy about. Below is the article. Kudos to David.
Starving the Cow
David VanDelinder, Executive Director
Raise rates, reduce commissions, institute a new business incentive program. Sounds like an unlikely formula for success: starve the cow to produce more milk; yet, that is what many companies are doing in property markets in Texas today. Countrywide, companies are experiencing increases in property claims frequency and severity, their investment returns are dismal and catastrophes are lurking around the corner. Agents understand the need for profitability, but cutting the lifeblood income of agents who produce that business seems like a short-term solution to a long-term problem.
Consider the economics of commission reductions. At 15 percent commission on a $1,000 homeowner premium, an agent makes $150. Reduce that commission to 12 percent and the agent’s income is reduced by 20 percent to $120. Some companies are reducing commissions to 10 percent or less on monoline property, which lowers the agent’s income by at least a third; but, some company public relations departments argue that premiums have increased as well. That’s true for a variety of reasons, including increases in Coverage A amounts dictated by carriers. A recent market report by the Texas Department of Insurance concluded that average homeowner premiums in Texas had increased 61 percent from 2000 to 2011, but during the same period cumulative inflation has eaten up at least 30 percent of that income and contributed to rising wage costs which often make up more than half an agent’s expenses. For many agents facing commission reductions next year, income on that $1,610 homeowners policy will be up only $11 over what they would have made on that policy in 2000 (at $1,000 premium) – hardly enough to make up for inflation.
Once again agents are asked to dig into their pockets to address company profitability, and this at a time when agents are struggling to gain market share from the directs and captives. For Texas agents, who live in a state where it is not all that hard to get rate increases, this makes no sense. The hallmark of independent agency business is customer service but that very service is threatened today by rising costs and reduced income. A starving cow costs less to keep, but she won’t produce more milk.
David VanDelinder, CPCU, AAI
President and CEO
dvand@iiat.org
(512) 762-1519 (cell)
P.O. Box 684487
Austin, Texas 78768
1115 San Jacinto Blvd.
800-880-7428