MarketScout (www.marketscout.com) recently released its industry barometer for March 2004.
According to Richard Kerr, chairman and CEO, “Rates are holding steady at 9 percent for the month of March. In a related matter, an age old issue has emerged which could impact insurers profitability – retail agent commissions.
“Some insurers cut commissions in the hard market, thinking increased premiums would offset lower commissions and yield the same compensation to the retail agent. Since the market is now softening and premiums are coming down, a few insurers have begun raising commissions back to ‘pre-hard market levels’. However, other insurers are standing pat on commissions. A few are even cutting commissions further. The insurers’ conundrum evolves around the retail agent’s control of the business. Insurance company executives must determine if the retail agent will move business if they cut (or maybe even fail to increase) commissions. Some industry observers would argue there are certain retail agents who will direct business to whichever insurer pays the highest commission, period. We don’t believe retail agents will take that course of action, but it does make sense that a retail agent will try to make a solid profit and if all else is equal, the insurer paying the higher commission may get the business.
“What’s the solution? Profit commissions. Insurers and retail agents who truly partner to deliver a profitable book of business will both win.”
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