so after the commissioner forces the state fund to cut our maximum commission to 5.5%, as part of his ploy to get state fund to raise there rates he now is allowing them to jump back into the mix and drastically cut rates. when we ever get our 4.5% back quackamendi?
Every Broker or Agent has been painfully aware of the adverse affect on our clients from the out-of-control W/C system over the past many years. The rate reductions are a welcome sight as are the new carriers willing to write W/C. So, the reform is working for the business owners and apparently the carriers.
What is not working is the other side of the equation. For professional brokers who add value by helping clients create and manage workplace safety; manage claims; review and fix audits; the result of the reform is now almost unaffordable. It seems our industry attacks problems in segments without considering the affect on all parties. Insurance companies are now reaping the benefits; business owners are now paying less and getting discounts for safety ( which they should). However, the net affect on a broker or agent is that a new standard has been set for commissions largely by what the State Fund pays- 5.5%- and that is now being applied to lower rates. So it’s a double-whammy for the broker or agent and yet he still has the same expense factors. This seems to be of no concern to anyone in the circle of providing the product. Garamendi seems to think agents and brokers are overpaid and provide no value and pressured SCIF to reduce commissions which set the new standard. Unfortunately, as this turns full circle, less broker involvement in safety in the workplace will generate more claims, And the beat goes on. If you do the math, commissions were reduced from 10% to 5.5% which is a 45% reduction. Rates are now dropping by all accounts at least 15% so the net affect to brokers and agents is that they are taking about a 64% hit in actual, spendable income and yet still being asked to do the same work. Something is very wrong with a system that would support this philosophy. It’s akin to raising road taxes to build roads; building them or using the money for some other purpose; and never repealing the tax.
Where are the Industry Leaders on this and why do we not hear a hue and cry from the broker/agent community. Are we afraid to ask that we be paid for what we do? Sure, you may be able to add broker fees but in reality it is not done very often because there is always someone who will quote without them and not provide the value-add. How about a fair commission rate so we can be part of the overall solution? How about an awareness campaign to enlighten Garamendi as to what a good broker does to earn his commission and why that is good for the overall system?
Thank you for reminding me and reinforcing why, I became a broker in 1985. Note the operative word broker, instead of agent, though I wear both hats.
Let’s take a look at the workers compensation COST TO OUR CLIENTS. For example, I have a client that had a pre ex mod rate of $6.42/$100 for their policy term effective 8/1/00 – 01. Written at 10% commission, the commission was $0.642/$100. For his current term effective 8/1/04 – 05, his rate is $17.50/$100. If I took the full State Fund commission of 5.5%, the commission would be $0.9625/$100.
This client had an employee seriously injured in a not at fault accident. We were immediately paid to replace our truck which was totalled. If you know the rules pertaining to subrogation recovery and experience modification, you know that this would impact our ex mod until recovery was completed. Due to the massive trauma to our employee, the fatality in the othe party’s vehicle, and litigation, we were penalized for two years on the mod. This increased the mod about 35%, premiums about 35%, and commissions about 35%. Did I deserve another raise?
The system needs more reform and we all need to participate. We can enhance the environment for businessowners and job creation here in CA with an overall better Workers Compensation system.
I do not take 5.5% on my State Fund business, I even have a client at 1%. It has been my policy to offer disclosure of my commissions/compensation to my clients, I have never been asked.
If the State Fund is the only market for a class of business, they don’t need people to “sell” their product. Let’s do away with commissions for workers compensation and negotiate fees for our clients based on the work we do. If we provide expertise, solutions, and a long term cost effective plan for our clients, they will compensate us.
so after the commissioner forces the state fund to cut our maximum commission to 5.5%, as part of his ploy to get state fund to raise there rates he now is allowing them to jump back into the mix and drastically cut rates. when we ever get our 4.5% back quackamendi?
Every Broker or Agent has been painfully aware of the adverse affect on our clients from the out-of-control W/C system over the past many years. The rate reductions are a welcome sight as are the new carriers willing to write W/C. So, the reform is working for the business owners and apparently the carriers.
What is not working is the other side of the equation. For professional brokers who add value by helping clients create and manage workplace safety; manage claims; review and fix audits; the result of the reform is now almost unaffordable. It seems our industry attacks problems in segments without considering the affect on all parties. Insurance companies are now reaping the benefits; business owners are now paying less and getting discounts for safety ( which they should). However, the net affect on a broker or agent is that a new standard has been set for commissions largely by what the State Fund pays- 5.5%- and that is now being applied to lower rates. So it’s a double-whammy for the broker or agent and yet he still has the same expense factors. This seems to be of no concern to anyone in the circle of providing the product. Garamendi seems to think agents and brokers are overpaid and provide no value and pressured SCIF to reduce commissions which set the new standard. Unfortunately, as this turns full circle, less broker involvement in safety in the workplace will generate more claims, And the beat goes on. If you do the math, commissions were reduced from 10% to 5.5% which is a 45% reduction. Rates are now dropping by all accounts at least 15% so the net affect to brokers and agents is that they are taking about a 64% hit in actual, spendable income and yet still being asked to do the same work. Something is very wrong with a system that would support this philosophy. It’s akin to raising road taxes to build roads; building them or using the money for some other purpose; and never repealing the tax.
Where are the Industry Leaders on this and why do we not hear a hue and cry from the broker/agent community. Are we afraid to ask that we be paid for what we do? Sure, you may be able to add broker fees but in reality it is not done very often because there is always someone who will quote without them and not provide the value-add. How about a fair commission rate so we can be part of the overall solution? How about an awareness campaign to enlighten Garamendi as to what a good broker does to earn his commission and why that is good for the overall system?
Dear Chris,
Thank you for reminding me and reinforcing why, I became a broker in 1985. Note the operative word broker, instead of agent, though I wear both hats.
Let’s take a look at the workers compensation COST TO OUR CLIENTS. For example, I have a client that had a pre ex mod rate of $6.42/$100 for their policy term effective 8/1/00 – 01. Written at 10% commission, the commission was $0.642/$100. For his current term effective 8/1/04 – 05, his rate is $17.50/$100. If I took the full State Fund commission of 5.5%, the commission would be $0.9625/$100.
This client had an employee seriously injured in a not at fault accident. We were immediately paid to replace our truck which was totalled. If you know the rules pertaining to subrogation recovery and experience modification, you know that this would impact our ex mod until recovery was completed. Due to the massive trauma to our employee, the fatality in the othe party’s vehicle, and litigation, we were penalized for two years on the mod. This increased the mod about 35%, premiums about 35%, and commissions about 35%. Did I deserve another raise?
The system needs more reform and we all need to participate. We can enhance the environment for businessowners and job creation here in CA with an overall better Workers Compensation system.
I do not take 5.5% on my State Fund business, I even have a client at 1%. It has been my policy to offer disclosure of my commissions/compensation to my clients, I have never been asked.
If the State Fund is the only market for a class of business, they don’t need people to “sell” their product. Let’s do away with commissions for workers compensation and negotiate fees for our clients based on the work we do. If we provide expertise, solutions, and a long term cost effective plan for our clients, they will compensate us.