CINCINNATI--(BUSINESS WIRE)--Ward Group, a consulting firm specializing in the insurance industry and the leading provider of benchmarking practices, recently published its findings from an in-depth study of Agency Compensation and Management Practices for property-casualty insurance companies. The study focused on commission practices, agent incentives and other agency management practices and includes aggregated results from 2008 and 2009 for a diverse group of 99 companies. Independent agency companies represented 80% of the participants. Key findings and observations were presented to participants in a webinar hosted by Jeff Rieder, President of Ward Group, on December 15, 2009.
For most property-casualty insurance companies, expenses relating to the distribution system represent the largest expense component outside of loss payments. Ward Group conducted the Agency Compensation and Management Practices Study to help companies measure their performance and establish meaningful benchmarks in this important area. Highlights of the study results and general observations follow.
Plans to lower agent compensation in 2010 outweigh plans to increase compensation by nearly a 3 to 1 margin. The study identified several notable trends for contingent commission planning, including:
Mr. Rieder observed that the top performing companies in the study (based on Ward’s 50 criteria) did not pay excessive commission. “A common misperception is that companies must pay higher commissions to generate more premium,” noted Mr. Rieder. “Top performers focus on ease of doing business and assertive agency management practices to drive new business results. These companies target compensation to be fair, but not excessive.”
Ward Group also found that top performing insurance companies achieved 34% more premium than average per agent. Key agency management business practices adopted by this group suggest that they:
In his closing comments, Mr. Rieder made several predictions about agency management practices for 2010. Total agency compensation is expected to decrease slightly, largely due to contingent commission changes. Agency trips and conferences are expected to be smaller and less costly than 2009 and prior years. Agency recruitment appears to be more aggressive as companies appoint more new agents in efforts to expand their sales force. However, most companies have not made effective changes to their contingent plan design over the last 3-5 years and some plans will not be in line with current market conditions and corporate objectives. Companies with assertive agency management and effective communication practices appear positioned to achieve the best operating results.
To obtain complete results of the Agency Management and Compensation Practices study, including detailed benchmarks by distribution channel and business mix, visit www.wardinc.com.
About Ward Group®
Ward Group is a consulting firm specializing in the insurance industry and the leading provider of industry benchmarking and best practices services. Ward Group analyzes staff levels and expenses for all areas of insurance company operations. For more information about Ward Group and the Ward Research Center, visit www.wardinc.com.