Florida Agents Challenged to Profit on Homeowners Business: FAIA

Many Florida independent insurance agencies are challenged to make money on the initial placement of the homeowners insurance policies.

That’s a finding from The Agent Compensation Study commissioned by the Florida Association of Insurance Agents (FAIA) to address growing member concerns that commission levels do not adequately cover the processing costs of residential property polices.

The study found that while the average commission of $201.12 more than covers the initial $125.96 servicing costs of a typical homeowners policy, what is left over ($75.16) is unlikely to cover an agency’s remaining indirect costs unless the agency is highly automated or does a good job selling other products to the same customer.

The functional cost part of the study, conducted by the certified public accounting firm Thomas Howell Ferguson, determined:

• The average total cost of servicing an HO-3 policy is $125.96.
• On average, 8.88 hours are spent processing each HO-3 policy with the most time spent on quoting activities (2.02 hours) and the least time spent servicing policies (0.78 hours).
• The average hourly rate associated with full-time equivalents (FTEs) processing HO-3 policies is $18.48.

The agency commissions part of the study by actuarial firm Perr & Knight found:

• The statewide average premium per policy is $1,866.06.
• The total average commission rate is 10.8 percent.
• The total average dollar commission paid for all carriers is $201.12.

Comparing the two reports, FAIA said that on average $75.16 is left to cover all other agency indirect operating expenses. Agencies with highly automated processes, account “rounding” proficiencies, niche products, or high percentages of clients paired with carriers paying commissions at the top range may fare much better than the average, while small agencies lacking these traits may fare much worse, according to the report.

Topics Florida Agencies Profit Loss Homeowners