The Ward Group recently announced the results of its Agency Compensation and Management Practices Study which aims to allow companies and agencies to compare and measure their own performance in order to “establish meaningful benchmarks in this important area.”
The study looked at the commission practices, agency incentives and other agency management practices from 2010 and 2011 of 69 different companies. 78% of the study’s participants were independent agency companies said Ward.
One of the more interesting findings for agents is that the Ward Group estimates that contingent commission payouts will be about 12 percent higher in 2012 based on their review of agency compensation and management practices at property casualty insurance companies.
The Ward study also presented the following results and trends it sees for agency compensation practices:
- Electronic fund transfer for commission payments has become more widely adopted
- Base commission plans have not changed significantly over the past three years
- 39% of companies plan to modify their contingent plan in 2012
- The average capped loss amount for stop loss thresholds has increased substantially since 2009 and five percent of companies increased the amount for 2012
- Minimum premium requirements for contingent commissions have increased since 2009 and 11 percent of companies increased premium volume requirements for 2012
- Seven percent of companies added growth requirements in 2012 to their contingent formulas and five percent added retention requirements
- 17% more agents attended trips in 2011 compared to 2010.
- Both new agent appointments and agency terminations are lower
- But five year agency retention declined for both the independent and captive agency benchmarks.
As Jeff Rieder, President of Ward Group explained, “The economic downturn over the past three years has made agency expansion more difficult. Companies may be unable to appoint enough agents to accomplish growth goals and agents are not necessarily willing to move business from an existing carrier relationship.”
Based on its research, the Ward Group predicts that total agency compensation will increase slightly in 2012, which it attributes largely to contingent commission changes. It believes, however, that agency trips and conferences will continue to be smaller and more economical than in the pre-recession years and appear to be “…regaining more use.”