Agency Management and Compensation Practices - 2013

Date:JUN 2013
Cost: $2500 Add to Cart

For most property-casualty insurance companies, expenses relating to the distribution system represent the largest expense component outside of loss payments.  Ward Group conducted a study on agency management and compensation practices at property-casualty insurance companies to identify business and best practices for agency distribution and develop meaningful benchmarks that companies can use to analyze and establish more effective distribution practices. Base commission, contingent commission, agency tiering/segmentation, as well as other areas related to distribution management were included in the analysis. 

The study was conducted in the February-April, 2013 timeframe and focused on results for 2011 and 2012. The objective of the study was to collect information and establish benchmarks relating to the following major topics:

Base Commission Practices, including:

  • Basis for payment calculation
  • Modified payments and/or excluded lines of business
  • Electronic payment capabilities
  • Agency notification requirements
  • Average base commission percentages by major line of business

Contingent Commission Practices, including

  • Basis for payment calculation
  • Actual payments made and targets
  • Modified payments and/or excluded lines of business
  • Growth bonus options
  • Loss ratio targets
  • Stop loss provisions and catastrophe loss inclusion
  • IBNR and Case loss reserves
  • Minimum volume requirements
  • Underwriting profit requirements
  • Guarantee options
  • Payment caps
  • Anticipated changes to plan structure

Agency Management Practices

  • Average number of total agencies/sales representatives for 2010 - 2013
  • Agency terminations for 2010 - 2013
  • Agency appointments for 2010 - 2013
  • First, third and fifth year agency retention
  • Agency termination premium volume thresholds
  • Average agencies per marketing manager benchmarks
  • Agency Tiering/Segmentation Practices
  • Average number of agency levels
  • Criteria for determining top agencies (premium volume, loss ratio, retention and growth targets)

Agency Trips and Incentive Travel Practices

  • Use of agency trips and conferences
  • Percentage of qualifying agencies
  • Average annual trips costs
  • Location of agency trips

Other Agency Benefits

  • Co-operative advertising participation rates and annual amounts per agency
  • Company paid medical, retirement and health benefits
  • Company paid rent, facility and other office benefits

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