Who’s Worth What in the Independent Agency System?

By | March 25, 2008

Fewer independent agencies gave salary increases to managers, sales producers and support personnel in 2007 compared to 2006, while half of all agencies reported that salaries stayed the same in 2007 compared to 2006. Of those agencies that did offer salary increases, pay raises were somewhat lower in 2007.

This is according to nearly 1,750 independent agencies from across the nation that responded to Insurance Journal’s annual online survey on agency compensation trends, providing valuable information on who’s worth what in the independent agency system.

Demotech Inc., IJ’s official research partner, provided analysis and input once again for this year’s Agency Salary Survey.

The decline in pay raises for agencies in 2007 is no surprise to industry veteran Madelyn Flannagan, Independent Insurance Agents and Brokers of America’s vice president of education and research. “Bonuses, salary increases, and those little extra perks always tend to fall off when the market takes a turn,” she said. “But they also go back up.”

While the nation faces tougher economic times, Flannagan attributes the cut backs to the soft market, not the economy. “It’s a soft market trend,” she noted.

Even though salaries may be down somewhat, job security is not usually an issue in a soft market, according to Flannagan. “Typically job stability is not a problem because they (agencies) are not losing clients; they are just losing revenue from premium volume. They still have the same amount of work to do, but they don’t have those increased premiums,” she said. Agents may be fighting a tougher battle to keep the business but the business is not gone, she added.

The survey found that while more than half (54.5 percent) of agencies staff sizes stayed the same in 2007 compared to 2006, some 29.7 percent increased staff size and 16 percent decreased staff size overall.

The majority of respondents (58.7 percent) anticipate keeping staff sizes the same in 2008 as well, while 34.6 percent plan to increase and just 6.7 percent plan to decrease staff sizes.

Compensation overall
Despite lower salary raises for those agency personnel lucky enough to receive a pay increase in 2007, overall, 49.6 percent of IJ’s survey respondents reported that salaries stayed the same in their agencies in 2007 compared to 2006. Less than a third (31 percent) reported salary increases were higher in 2007 than in 2006, while 19.4 percent reported salary increases were lower in 2007 compared to 2006.

This result differed slightly from the previous year’s survey where 36 percent of respondents said salary increases were higher in 2006 compared to 2005.

While respondents reported average salary increase for agency management at 2.9 percent in 2007, more than one-third of agency management (37.4 percent) were given no salary increase in 2007.

A near majority of sales staff, 40.9 percent, also received no salary increase in 2007. However, for those receiving salary increases, the average salary increase for sales staff in 2007 was just 2.7 percent.

Support staff received the highest increases in salary in 2007. Salary increase for support staff averaged 3.2 percent in 2007. More than a third (37 percent) reported service staff salary increases of between 1 to 3 percent, while 28 percent gave raises of 4 to 5 percent, and 12 percent gave raises of more than 5 percent.

Susan Henry, senior vice president, The Jacobson Group, Jacobson Solutions division, says that in the agency-brokerage world it feels like everybody is hiring and that everybody is struggling to find talent. “I’ve never seen things quite so competitive between workers, as they are right now,” she said. Everything from customer service reps and account managers, to licensed producers, agents and brokers, “seem to be hot” right now, she said.

Henry noted that support personnel, including CSRs and account managers, are the most competitive. “I’m seeing a lot of movement among that customer service and account manager group,” Henry noted. “Account executives, account managers, and customer service rolls are leaving. They’re willing to consider employment elsewhere, for not very much more money,” she added. In today’s agency, service roles value other types of benefits, beyond compensation, including flexible schedules, work from home options, rewards programs, and other benefits may be enticing this group to move, she said. “As long as there’s a small bump in salary or total compensation,” they may move, she noted.

Agency benefits
Michael Marino, of the global consulting firm Watson Wyatt, says he doesn’t typically see things like employee benefits cut during economic recessions and soft market cycles. ” “We typically see things more like staff being cut,” he said.

Agencies offering group health insurance stayed the same in 2007 compared to 2006, according to the survey results. Some 80 percent of agencies reported offering health care coverage to employees in 2007 and 2006.

The number of agencies offering a 401(k) retirement plan dropped slightly in 2007. Only 53 percent of survey respondents reported offering a 401(k) in 2007 compared to 56 percent in 2007. About half or more of all agencies reported offering dental (48.7 percent), group life/disability (55.4 percent), and education reimbursement (46.8 percent).

Other ancillary benefits offered included: profit sharing (21.7 percent); FSA (11.5 percent); IRA (9.6 percent); pension plan (9.3 percent); stock options (3.7 percent) and ESOP (3.4 percent). Some 11.6 percent reported offering no employee benefit options.

Health care, retirement plans, profit sharing, stock plans, education reimbursement, and other ancillary benefits in today’s agency are viewed as core and central to a total rewards compensation framework, Marino said. “And a lot of our clients are engaging sort of this total rewards concept.”

“We are seeing whether it is a customer service rep or a full blown producer,” said Henry, “there needs to be some creativity in how you create a total rewards program.” Henry said a total rewards program is beyond cash compensation and should include base pay, bonus, commissions, and benefits that’s more interesting and more motivating than competitors.

“Whereas maybe in the past, I might have been inclined to say, it really is a cash business and cash is king,” Marino said. “But I think for a while now this industry (insurance) has been moving towards a total rewards framework and these types of benefits are really core to the overall rewards program.”

To read the full story on Insurance Journal’s Who’s Worth What Agency Salary Survey, see the March 10, 2008, print issue, or download the digital edition at:
https://www.insurancejournal.com/digital/products.php?action=view&item=685

To purchase the full Who’s Worth What Salary Survery results for $99 visit:
https://www.insurancejournal.com/salary/pages/order

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