State Compensation Insurance Fund announced that it is instituting a performance-based compensation plan effective for 2005 business, and that it will begin disclosing broker commissions to clients on Oct. 1 and will revise its base commission structure effective Jan. 1, 2006.
“We are very pleased to see the State Fund implement an incentive performance compensation plan that will reward large-volume brokers who help their clients achieve a proven record of safety and loss control,” said Clark Payan, IBA West CEO.
Effective January 1, 2006 the State Fund will institute a new commission plan. State Fund commissions will range from 3% to 8% for most accounts depending upon individual account characteristics. Those accounts with superior safety records will receive the higher commissions, while accounts with less successful loss histories will receive lesser commissions. The commission schedule can be found on the IBA West website at http://www.ibawest.com/pdf/Articles/SCIF2006Commission.pdf.
“We also applaud the State Fund for strengthening their commission structure. Clearly this reflects their desire to keep good accounts, which is another sign of an increasingly competitive workers’ compensation market and proof that the reforms are driving down costs for employers,” said Payan.
The State Fund also announced a Safety Incentive Performance Plan, retroactive to January 1, 2005 that allows eligible Preferred and Select Brokerages to earn additional compensation based on their book of business evaluating total volume and loss ratio. The potential compensation of the Safety Incentive plan will be disclosed to policyholders.
Effective October 1, 2005, SCIF will begin disclosing commissions on all new and renewal business. “State Fund feels that disclosure of the commission agreement between State Fund, its brokers and their clients is in the best interests of all parties,” said State Fund Acting President Jim Tudor.
“State Fund believes that the more a consumer understands the insurance transaction and the services you [brokers] provide, the more appreciate they will be of your professionalism and the value you add. We believe that disclosure will have the very positive effect of improving the consumer’s confidence in all aspects of the insurance industry,” wrote Ingo Coolins, State Fund Manager, Broker Relations in a letter sent today to all brokers.
State Fund Vice President George Vignolo elaborated, “Clients rely on their brokers for insurance expertise and professional guidance, but, even more, brokers are deemed to be the ‘representatives’ of the insurance consumer. Disclosure of the commission arrangement provides an important tool for satisfying this long standing legal requirement, as well as for educating consumers.”
“IBA West was consulted by the State Fund to offer its advice on how to structure such insurance transaction transparency so that it serves the needs of client and broker,” said Payan. “Insurer disclosure is a reality that many of our members are facing, so we feel obliged to assist in their behalf when we are called on.” Many members are choosing to voluntarily disclose compensation. “That is why IBA West is developing guidelines for those who wish to do so,” he added.
“IBA West will continue to work closely with the State Fund to develop programs that reward brokers and their clients for superlative safety records,” said Payan.
Was this article valuable?
Here are more articles you may enjoy.