Insurance journal feb 2013 agency compensation

FEBRUARY 25, 2013 | Vol. 91, No. 4 WEst REGIoN

INsURING PERsoNAl WAtERcRAFt

AGING ElEctRIcAl sYstEms

sWEtt GAlA

SPECIAL REPoRT

N14 | INSURANCE JOURNAL-NATIONAL REGION February 25, 2013 www.insurancejournal.com

February 25, 2013 INSURANCE JOURNAL-NATIONAL REGION | N15www.insurancejournal.com

ing that level then there will be negative consequences that apply. If they are above that threshold they stay static on their sal-ary. If they exceed the standards of using that 90 percent they are getting some type of bonus,” Berry says. The bonus could be a cash reward or other incentive such as increased vacation time. Brian Burke, chairman of B.H. Burke & Co. Inc., a Westbrook, Conn.-based organi-zation that advises individuals and firms on the sale, purchase and management of independent insurance agencies, says many of the agencies he works with understand the need to improve the compensation system. He says the recession and the chal-lenging insurance market of recent years convinced a number of agency owners to finally change their agency compensation playbook, especially as it deals with sales. “Most agencies know that there’s some improvement to be made on the sales com-pensation line,” Burke says. “So this period of a few years spurred a number of them to finally do what they know they should be doing there.” One of the biggest changes he’s seen to producer compensation has been the elimination of renewal commissions on small accounts. This compensation play is nothing new, Burke adds. But tough times brought more buy-in from latecomers in the industry. “Almost all agencies are realizing that

Managing sales in an indepen-dent agency is a team sport. From top level managers to office and support staff —

every person in an agency has a role to play in helping the agency win the sales game. When one person fails to make the play, the whole agency team suffers. And when an agency suffers, so does employee com-pensation. Or at least it should, say the experts. Producer compensation in particular suffers when sales are down, but the com-pensation of everyone in an agency should be affected when sales don’t happen, says Al Diamond, president of the Cherry Hill, N.J.-based Agency Consulting Group, an independent agency valuation and consult-ing firm serving firms nationwide. “Employees need to realize that if an agency is going backward, for whatever rea-son — lost business, soft rates, no growth — it’s very difficult to give more money [to salaries] because you are literally taking it out of whatever profit is left, if there is any,” Diamond says. Diamond says he witnesses the vast majority of agencies — 95 percent by his estimate — continuing to give salary increases based solely on the longevity of the employee, with average raises ranging from 2 percent to 3 percent. Traditional compensation models that reward employ-ees based on years of service is a horrible way of rewarding good employees, he says,

because “agencies end up rewarding medio-cre employees, right along with the good ones.” Agency compensation should be sensitive to the growth and profitability of the agen-cy. That’s why Diamond advocates incentive-based compensation for all employees, not just producers. “We are spending a lot of time doing incentive compensation pro-grams for agencies to get them out of the process of giving raises based on longevity,” he says.

Justin Berry, vice president, sales manage-ment for MarshBerry, a national consulting services organization for independent agen-cies and brokerages, hears a lot of talk about incentive-based compensation for employees outside of sales. But, he agrees, it’s mostly just talk. “I wouldn’t say it’s the norm,” Berry says. “It’s the norm for a conversation but not all agency owners have gone to incen-tive-based compensation yet.” Agency compensation models have to move in that direction, according to Berry. “It has to go to where they [owners] can have control over certain metrics. It’s not the entire salary or base, but we’d like to see a standardized renewal expectation of at least 90 percent for someone in the account executive role. If they are not meet-

Manager/Owners Producers StaffEast $144,935 $68,230 $51,884 Midwest $100,345 $64,662 $45,916 South Central $125,468 $55,587 $52,679 Southeast $109,939 $61,955 $50,670 West $131,506 $88,186 $65,910

Average Agency Salaries by Region

Average Salary Paid Average Hours WorkedCommercial lines CSR $58,889 40.45 Personal lines CSR $42,571 39.10Support staff average $51,749 39.90

CSR Salaries and Hours

What Strategies Agencies Implemented in 2012, or Plan to Implement in 2013 2012 2013Cut benefits 7.3% 2.8%Shift health plan costs to employees 9.4% 9.2%Increase benefits 5.9% 6.1%Force reduction of employees 9.4% 5.2%Postpone hiring 37.9% 25.6%Postpone raises 32.2% 19.0%Increase hiring 24.2% 42.7%Increase compensation 25.6% 38.7%

How Agencies Base Compensation Incentive Plans

Agency profits 35.6%Productivity 28.2%Revenue growth 25.5%Contingent commissions 15.6%Individual performance 36.7%No incentive plan 24.5%Other 4.7%

Health Insurance: % Paid by Agency for Employee

East 69%Midwest 49%South Central 54%Southeast 57%West 68%

Management/Agency Owner/Agency Principal 3.51 Producer/Sales 3.03 Support Staff/CSR/Account Executive 2.75 * 5 = Most Satisfied; 1 = Least Satisfied

Agency Compensation Satisfaction Index*

2012 2011 Management/Owner/Principal 4.5% 3.9%Producer/Sales 5.5% 3.3%Support Staff/CSR/Account Executive 2.3% 2.2%*Includes all income changes in year

Average Agency Total Income Change*

Agencies’ Plans to Change Payroll Expense in 2013

Reduce payroll expenseIncrease payroll expenseKeep the sameNot sure

7.3%5.8%

41.3% 45.7%

Agency Salary Increases in 2012

Higher than 2011 Lower than 2011Same in 2012 compared to 2011

49.9%

11.0%

39.1%

Agency Staff Size in 2012

IncreaseDecreaseStay the same

48.3%

15.5%

36.3%

Anticipated Agency Staff Size in 2013


53.5%

3.9%

42.7%

Change in Agencies’ Health Plans in Past Year

YesNoNot Sure

3.3%

65.8%

30.9%

Agencies Paying for Spouse/Family Health

YesNoNot Sure

3.7%

69.3%

27.1%

Agency Owners and Health Insurance

Different plan than employeesSame plan as employeesNot Sure

3.1%

78.8%

18.2%

Producer Commissions in 2012

IncreaseDecreaseStayed the same in 2012 compared to 2011

39.6%

15.4%

45.0%

Agencies’ Plans to Change Commission Structure

Changed in 2012Will change in 2013No changes

81.6%

12.0%6.4%

Owners Thinking About Selling the Agency

YesNoNot applicable

5.5%

89.1%

5.5%

Manager/Owners Producers StaffLess than 1 year $87,000 $40,500 $43,000 1-2 years $27,250 $35,625 $37,650 3-5 years $71,286 $55,409 $41,506 6-10 years $89,588 $57,560 $54,400 11-20 years $101,589 $65,228 $47,117 21-30 years $131,013 $81,146 $59,765 More than 30 years $141,900 $97,852 $61,059

Average Agency Salaries By Experience

What Benefits Agencies Offer 2013 2012 2011 2010Group health insurance 77.7% 76.8% 79.9% 79.1%Health Savings Account* 32.2% Dental 52.5% 48.9% 50.1% 48.0%Group life/disability 53.7% 56.6% 56.1% 54.6%401(k) 57.7% 55.0% 53.9% 52.4%Profit Sharing 17.8% 17.4% 20.1% 19.2%IRAs 10.4% 9.1% 8.4% 9.9%Pension Plan 5.7% 5.4% 5.0% 7.4%ESOP 4.6% 4.5% 4.3% 4.3%Stock Options 4.5% 1.8% 2.6% 3.1%FSA 24.4% 14.0% 12.3% 11.1%Education reimbursement 28.0% 44.6% 48.2% 48.5%Childcare/Daycare* 3.0% No Benefits Provided 11.7% 12.6% 10.0% 11.3%* First year response

48.9%

2012

56.6%

17.4% 9.1% 5.4% 4.5% 1.8%

14.0% 44.6%

12.6%

50.1%

2011

56.1%

20.1% 8.4% 5.0% 4.3% 2.6%

12.3% 48.2%

10.0% 11.3%

19.2%9.9%7.4%4.3%3.1%

11.1%48.5%

48.0%54.6%

2010

Childcare/Daycare* 3.0% 3.0%

401(k) 57.7% 55.0% 53.9% 57.7% 55.0% 53.9% 52.4%

Group health insurance 77.7% 77.7% 76.8% 79.9% 79.1%


Under $1 million 27.1%$1 million - $5 million 50.5%$5 million - $10 million 68.6%$10 million - $25 million 79.5%$25 million - $50 million 81.6%$50 million - $100 million 71.5%$100 million or more 80.7%$100 million or more 80.7%

Changes to Health Insurance Plan in Past Year

Increased employee contribution 43.44%Increased deductible limits 61.31%Implemented higher co-pays for participants 44.10%Reduced drug benefit 10.49%Reduced other benefits 8.85%

Agencies' Average Salaries by Premium Volume (Management) Owners/Principals Office Sales Accounting Personal Commercial Marketing P/C Premium Volume President/CEO Manager Manager Manager Lines Mgr. Lines Mgr. Manager Under $1 million $51,500 $45,179 $42,000 $31,000 $30,750 $43,750 $55,000$1 million - $5 million $75,259 $45,631 $53,580 $35,918 $36,500 $45,602 $102,813$5 million- $10 million $101,853 $63,917 $92,593 $50,774 $47,656 $61,198 $54,250$10 million - $25 million $155,257 $77,537 $99,813 $55,303 $60,861 $69,194 $68,143$25 million - $50 million $181,424 $89,143 $168,750 $81,875 $110,161 $106,908 $108,810$50 million - $100 million $244,095 $95,804 $145,441 $88,889 $77,500 $89,808 $85,476$100 million or more $312,500 $97,031 $229,643 $94,342 $108,750 $142,647 $118,269

Average Agency Salary Adjustment 2012 2011 2010 2009 2008 2007Management/Agency Owner/Agency Principal 2.8% 1.1% -0.6% -1.2% 2.2% 2.9%Producer/Sales 2.9% 1.6% -0.2% -0.8% 2.3% 2.7%Support Staff/CSR/Account Executive 2.2% 2.1% 0.6% -0.1% 2.7% 3.2%

CSR Average Salaries Commercial Lines Personal Lines Support StaffEast $58,403 $38,438 $45,313 Midwest $48,221 $37,093 $44,883 South Central $56,740 $40,553 $58,833 Southeast $51,264 $35,991 $73,500 West $73,659 $55,095 $54,161

‘Agency compensation should be sensitive to the growth and profitability of the agency.’

continued on page N16

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no increase at all,” Burke says. But things have gotten better. “People are a little less worried that we are going to go over the edge of the cliff,” he says. Even though the economy is not roar-ing back, the property/casualty industry is experiencing a modest lift in income thanks to a gradual hard market in com-mercial lines. “So salary increases are not only hoped for and expected, but also affordable,” says Burke. “There’s nothing dramatic happen-ing but for agencies that are reasonably well-run and have enough new business production to grow a little” agency compen-sation is looking better. Burand is also seeing salaries rise in the agencies he works with but he sees the increased pay coming more out of need rather than agency profits. “Staff salary increases are minimal but increasing out of

SPECIAL REPoRT
















7.3%5.8%

41.3% 45.7%



49.9%

11.0%

39.1%



48.3%

15.5%

36.3%



53.5%

3.9%

42.7%


YesNoNot Sure

3.3%

65.8%

30.9%


YesNoNot Sure

3.7%

69.3%

27.1%



3.1%

78.8%

18.2%



39.6%

15.4%

45.0%



81.6%

12.0%6.4%


YesNoNot applicable

5.5%

89.1%

5.5%




48.9%

2012

56.6%

17.4% 9.1% 5.4% 4.5% 1.8%

14.0% 44.6%

12.6%

50.1%

2011

56.1%

20.1% 8.4% 5.0% 4.3% 2.6%

12.3% 48.2%

10.0% 11.3%

19.2%9.9%7.4%4.3%3.1%

11.1%48.5%

48.0%54.6%

2010


401(k) 57.7% 55.0% 53.9% 57.7% 55.0% 53.9% 52.4%









Agency Salary Surveyyou really can’t afford to pay the service staff and the producer on small accounts,” he says. The transition has been slow — it’s been happening for decades — and it has been hard psychologically for many agency owners and producers. “But when you have tough times and you have the opportunity to say, ‘hey we have to tighten our belts here,’ it tends to be a time when changes are stepped up,” Burke says. For Chris Burand, found-er and owner of Burand & Associates LLC based in Pueblo, Colo., the issue is alignment. “It pays to be pound wise and penny foolish when it comes to compensation,” says Burand. “A good compensation plan is a plan that aligns the agency’s interest and the producer’s interests. This means the producer is only paid for sales that increase the agency’s value and income.”

Salaries Up overall There is some good news in the area of agency compensation: In the past year, agents’ pay has rebounded, growing about 2 to 4 percent on average. As a result, salaries for everyone else in agencies have been on the up as well. According to InsuranceJournal’s annual Agency Salary Survey 2013, average salary adjustments for 2012 came in a full percent-age point higher for all three employment sectors:

• Agency owners, principals and man-agement reported salary increases of 2.8 percent in 2012, compared to a 1.1 percent increase in 2011.

• Producers/sales reported average increases of 2.9 percent in 2012, com-pared to a 1.6 percent increase in 2011.

• Agency support staff reported a 2.2 percent increase in salary in 2012, com-pared to a 1.1 percent increase in 2011.

Total Income The 2013 Agency Salary Survey revealed even more positive trends in total income, which includes profit sharing, bonuses, and other income:

• Agency owners/principals/managers reported a 4.5 percent bump in total income for 2012 compared to a 3.9 per-cent increase in 2011.

• Producers/sales said their total income increased by 5.5 percent in 2012, com-pared to a 3.3 percent increase in 2011.

• Support staff reported a 2.3 percent increase in total income compared to a 2.2 increase in 2011.

While compensation in agencies appears to be on the rise, the increases are modest in most regions across the country. According to Burke,

following the financial crisis of 2008, the prevailing message of insurance agencies to their employees was that times were uncer-tain — and so was compensation. “For a couple of years many people had

‘Salary increases are not only hoped for and expected, but also affordable.’

Playbook, continued from page N15


with the employee base that you already have,” he adds. Burke agrees. He hasn’t seen increases in staff but he has seen many agencies doing a better job using technology to be more efficient, sometimes changing agency man-agement systems to help. “Revenue per employee is the whole deal,” he says. “Agencies have to find ways to operate more productively so there’s quite a lot of effort going on in the better agencies to learn how to be more efficient.” In Berry’s view, agency staffing has never really decreased, even in the worst years of the recession. “Usually small businesses don’t react as quickly to the market. They

necessity,” Burand says. “Agency owners are recognizing that after several years of little to no increases, their staff need raises.” According to the IJ survey, 25.5 percent of agency owners/management/principals increased the overall compensation paid by their agencies in 2012, and 38.7 percent plan to increase compensation in 2013. Jo-Ann Gastin, senior vice president for human resources at Lockton, says many agencies, including Lockton, took steps dur-ing the recession and soft market to work smarter, opening up monies to increase compensation. “We’ve all taken steps to right-size,” she said. “That always impacts the bottom line and releases money for increased salaries. I think we’ll be seeing more of that in the future.”

The Right Staffing Agencies are not only paying out more in compensation, but many agencies are also paying more employees. Agencies have either stabilized or are growing their staffs; not many are downsizing. According to IJ’s Agency Salary Survey, 36.3 percent of respondents reported increases in staff size in 2012. Just 15.5 percent of respondents reported decreas-ing staff, while nearly half (48.3 percent) reported staff size stayed the same in 2012 compared to 2011. More than half of all agencies responding said they believe their agency’s staff size will remain the same in 2013 as 2012, but some 42.7 percent believe their agencies will increase staff size this year. Just 3.9 percent anticipate staff size will decrease in 2013. According to research conducted by his Agency Consulting Group (ACG), most agencies will remain stable or shrink in staff size in the coming year, Diamond says. “One of things we measure in our composite group on a regular basis is the number of employees and the revenue per employee,” he says. The latest set of numbers revealed by ACG’s composite group show that agencies under $1 million in revenue averaged 6.56 employees in 2011, while in 2012 that num-ber posted at 6.33.

The ACG survey also found that agencies between $1 million and $2 million averaged 16.8 employees; in 2012 it was 16.6. Agencies between $2-3 million averaged 24 employees and they stayed stable at 24 employees. And the largest agencies, those with more than $3 million in revenue, averaged 65.3 employees in 2011 and 64.3 employees in 2012. In Diamond’s view, agencies are finally using automation appropriately to generate more revenue per employees. In addition to increasing efficiency through automation, those agencies with incentive compensation plans in place are able to provide raises to employees, he says. “And you do that by not adding employees. You do that by growing
















7.3%5.8%

41.3% 45.7%



49.9%

11.0%

39.1%



48.3%

15.5%

36.3%



53.5%

3.9%

42.7%


YesNoNot Sure

3.3%

65.8%

30.9%


YesNoNot Sure

3.7%

69.3%

27.1%



3.1%

78.8%

18.2%



39.6%

15.4%

45.0%



81.6%

12.0%6.4%


YesNoNot applicable

5.5%

89.1%

5.5%




48.9%

2012

56.6%

17.4% 9.1% 5.4% 4.5% 1.8%

14.0% 44.6%

12.6%

50.1%

2011

56.1%

20.1% 8.4% 5.0% 4.3% 2.6%

12.3% 48.2%

10.0% 11.3%

19.2%9.9%7.4%4.3%3.1%

11.1%48.5%

48.0%54.6%

2010


401(k) 57.7% 55.0% 53.9% 57.7% 55.0% 53.9% 52.4%
























7.3%5.8%

41.3% 45.7%



49.9%

11.0%

39.1%



48.3%

15.5%

36.3%



53.5%

3.9%

42.7%


YesNoNot Sure

3.3%

65.8%

30.9%


YesNoNot Sure

3.7%

69.3%

27.1%



3.1%

78.8%

18.2%



39.6%

15.4%

45.0%



81.6%

12.0%6.4%


YesNoNot applicable

5.5%

89.1%

5.5%




48.9%

2012

56.6%

17.4% 9.1% 5.4% 4.5% 1.8%

14.0% 44.6%

12.6%

50.1%

2011

56.1%

20.1% 8.4% 5.0% 4.3% 2.6%

12.3% 48.2%

10.0% 11.3%

19.2%9.9%7.4%4.3%3.1%

11.1%48.5%

48.0%54.6%

2010


401(k) 57.7% 55.0% 53.9% 57.7% 55.0% 53.9% 52.4%











want to know they are in control of their income. They also want a re-occurring revenue stream that most organizations or indus-tries don’t offer, Berry added. That’s a perk that the insurance business delivers over other sales industries. “They get paid 90 cents on every dollar every year plus that high retention percent-age of that re-occurring revenue,” Berry says. “They only have to sell that product one time and get paid on it 90 percent of the time for the rest of their lives.” Lockton’s Gastin says that’s one aspect that draws top-notch sales professionals

from outside of the insur-ance world into the busi-ness. “We have a unique model and our financial model does lend itself well to the entrepreneur because it’s their own busi-ness,” she says. “It’s a very different financial model than you would see in other companies.” The independent agen-cy producer model has no compensation restric-tions, and no geographic restrictions. “Producers are literally in their own business and can go any-where that they want and make as much money as they want,” says Gastin, who believes that’s a good recruiting tool for the industry. Diamond says what pro-ducers want in compensa-tion may depend on where they are at in their career. “The producers that are young and inexperienced are looking for the highest dollar amount coming out of the agency,” he says. “But the producers who know the business and under-stand that it is the net

hang in there a little longer before making changes,” he says. He has seen agencies move out lower performers in recent years. “It’s been a good opportunity for that decision,” Berry says. Now, as times for agencies improve, he sees agencies hiring again. “Hiring is increasing right now. It’s the right time to hire. But it’s always the right time to hire the right per-son.” Burand says that too many agencies make the mistake of waiting to hire staff until sales increase so much that the workload is not bearable. “The best time to hire is when the work-

load is high but manageable, so that the staff still have time to help train the new people,” Burand says. “The smartest agency managers know that hiring staff earlier rather than later can make all the differ-ence in whether an agency achieves quality organic growth.”

The Right Compensation Plan The insurance industry is well-positioned to attract top salespeople for a number of reasons. Producers want to be rewarded for their success with an open opportunity to earn more money, according to Berry. They

SPECIAL REPoRT

Agency Salary Survey
















7.3%5.8%

41.3% 45.7%



49.9%

11.0%

39.1%



48.3%

15.5%

36.3%



53.5%

3.9%

42.7%


YesNoNot Sure

3.3%

65.8%

30.9%


YesNoNot Sure

3.7%

69.3%

27.1%



3.1%

78.8%

18.2%



39.6%

15.4%

45.0%



81.6%

12.0%6.4%


YesNoNot applicable

5.5%

89.1%

5.5%




48.9%

2012

56.6%

17.4% 9.1% 5.4% 4.5% 1.8%

14.0% 44.6%

12.6%

50.1%

2011

56.1%

20.1% 8.4% 5.0% 4.3% 2.6%

12.3% 48.2%

10.0% 11.3%

19.2%9.9%7.4%4.3%3.1%

11.1%48.5%

48.0%54.6%

2010


401(k) 57.7% 55.0% 53.9% 57.7% 55.0% 53.9% 52.4%
























7.3%5.8%

41.3% 45.7%



49.9%

11.0%

39.1%



48.3%

15.5%

36.3%



53.5%

3.9%

42.7%


YesNoNot Sure

3.3%

65.8%

30.9%


YesNoNot Sure

3.7%

69.3%

27.1%



3.1%

78.8%

18.2%



39.6%

15.4%

45.0%



81.6%

12.0%6.4%


YesNoNot applicable

5.5%

89.1%

5.5%




48.9%

2012

56.6%

17.4% 9.1% 5.4% 4.5% 1.8%

14.0% 44.6%

12.6%

50.1%

2011

56.1%

20.1% 8.4% 5.0% 4.3% 2.6%

12.3% 48.2%

10.0% 11.3%

19.2%9.9%7.4%4.3%3.1%

11.1%48.5%

48.0%54.6%

2010


401(k) 57.7% 55.0% 53.9% 57.7% 55.0% 53.9% 52.4%


























7.3%5.8%

41.3% 45.7%



49.9%

11.0%

39.1%



48.3%

15.5%

36.3%



53.5%

3.9%

42.7%


YesNoNot Sure

3.3%

65.8%

30.9%


YesNoNot Sure

3.7%

69.3%

27.1%



3.1%

78.8%

18.2%



39.6%

15.4%

45.0%



81.6%

12.0%6.4%


YesNoNot applicable

5.5%

89.1%

5.5%




48.9%

2012

56.6%

17.4% 9.1% 5.4% 4.5% 1.8%

14.0% 44.6%

12.6%

50.1%

2011

56.1%

20.1% 8.4% 5.0% 4.3% 2.6%

12.3% 48.2%

10.0% 11.3%

19.2%9.9%7.4%4.3%3.1%

11.1%48.5%

48.0%54.6%

2010


401(k) 57.7% 55.0% 53.9% 57.7% 55.0% 53.9% 52.4%









Managing Sales by Team Effort

Every single agency out there needs good sales management, but sales management isn’t solved

by hiring a single sales manager. “Sales management is a team sport. The whole agency’s management team has to be involved in it,” maintains Brian Burke, chairman of B.H. Burke & Co. Inc., a Westbrook, Conn.-based organization that advises individuals and firms on the sale, pur-chase and management of independent insurance agencies. Like any team, the sales team needs a leader with credibility among the producer staff. “But there’s a lot of administrative work that has to happen with sales management, meaning giving good information,” he says. “There’s a lot of admin that needs to happen by people who are not neces-sarily sales leaders but who are in the agency and in the whole sales management effort. It’s not until you get really larger that you have a full time sales manager. Those are usually shared tasks.” Owners must give agency producers a sales model to run on, a clear path for what the agency is going to do for them to be successful, according to Justin Berry, vice president, sales management for MarshBerry, a national consulting services organiza-tion for independent agencies and brokerages. This includes a solid sales infrastructure, training sup-port, technical support, style and strategy. “They’ve always known what they needed to do but now agency owners who were once producers themselves are most likely saying, ‘Why do I want to make it harder for them to be successful?’ “Giving them a model to run on allows them to shorten the time frame it takes to be successful,” Berry says. “Most likely, a producer that is going to be able to grow a $500,000 book of business or more is going to do it no matter what but why not shorten that process of getting there?” Every owner knows that truly talented producers are not easy to come by. “Good producers, not all producers, are looking for great opportunities to make more sales,” says Burand, founder and owner of Burand & Associates LLC based in Pueblo, Colo. “These producers under-stand more sales is more important than a specific compensation plan. These producers though are hard to find.”



always be a selling point for candidates and greater incentives will attract stronger tal-ent.” Berry says it’s important for agency own-ers to understand that they “get what they pay for” when it comes to top employees. “It’s a tough bite to put out money for a good producer,” he says, but in the end it’s worth it to the success of the agency. InsuranceJournal’sAgencySalarySurveycollected1,386responsesfromindependentinsuranceagenciesandbrokeragesnationwideviaanonlinesurvey.DemotechInc.,IJ’sofficialresearchpartner,assistedwithanalysisofthisyear’ssurveyresults.Formoreinformation,[email protected].

money that counts and not gross money are saying, ‘We can trade off percentage com-mission if I can get other things paid for that I would have to pay for myself.’ They are looking for the net dollar.” Burke says what producers want most is a fair split of commissions. “And it’s all over the place as to what the perception of fair is,” he says. They also want “good support” in terms of having proposals prepared on time, good service, and good carrier relationships. Then producers who are moving through their 30s and early 40s realize that they not only have to get income, they have to “build some equity in something,” Burke says. That means some type of post-career benefits, usually in the form of deferred compensa-tion. “So if they if they die, or are disabled or retire they, or their beneficiaries, get paid a percentage of their commissions for a few years. It’s usually in the form of deferred comp in addition to the cash compensa-tion,” Burke says. Some agencies embrace that idea and some fight it. “It’s something you want your producers to have. Why fight it? And it’s a very good recruiting tool,” Burke adds. Diamond agrees that retirement benefits, whether a pension plan, a deferred com-pensation plan, or shadow stock, are a good idea for both the producer and the agency. “The reason it benefits the agency is that the more they have tied up in those plans the more likely it is that those producers will stay until retirement as opposed to jumping ship. The reason it’s good for the producer is that he has the same benefit as if he owned an equity position in the agency or in his book,” he says. This kind of benefit is important to offer key agency players who, Diamond says, are the “most valuable players” in an agency. When it comes to the right compensation plan for service staff, good wages are impor-tant. “What is important for agency owners is to determine whether they need quality staff,” Burand says. “Quality staff are far more productive than average staff but the agency must pay approximately 10 percent more for this quality. These agency owners

believe 10 percent more is a great invest-ment. Agency owners that focus less on productivity feel differently.” Dave Coons, senior vice president of The Jacobson Group, says the insurance industry as a whole is witnessing a push to incentiv-ize. “While base salaries are remaining relatively flat, insurance organizations are crafting enticing bonus plans and benefit offerings. To cater to a diverse and mobile workforce, flexibility in scheduling and geo-graphic location is becoming commonplace. Work-from-home and other telecommuting options are opening up the talent pool,” he says. “Competitive compensation will

SPECIAL REPoRT
















7.3%5.8%

41.3% 45.7%



49.9%

11.0%

39.1%



48.3%

15.5%

36.3%



53.5%

3.9%

42.7%


YesNoNot Sure

3.3%

65.8%

30.9%


YesNoNot Sure

3.7%

69.3%

27.1%



3.1%

78.8%

18.2%



39.6%

15.4%

45.0%



81.6%

12.0%6.4%


YesNoNot applicable

5.5%

89.1%

5.5%




48.9%

2012

56.6%

17.4% 9.1% 5.4% 4.5% 1.8%

14.0% 44.6%

12.6%

50.1%

2011

56.1%

20.1% 8.4% 5.0% 4.3% 2.6%

12.3% 48.2%

10.0% 11.3%

19.2%9.9%7.4%4.3%3.1%

11.1%48.5%

48.0%54.6%

2010


401(k) 57.7% 55.0% 53.9% 57.7% 55.0% 53.9% 52.4%









Agency Salary SurveyPersonnel Budget Ratio

How much of a bite should compensa-tion take out of an agency?

In order for most agencies to have satisfactory profitability, total personnel budgets should be kept in the 60s as a percentage of regular commissions, not including contingent commissions, accord-ing to Brian Burke, chairman of B.H. Burke & Co. Inc., based in Westbrook, Conn. “So if you have an agency with $1 mil-lion of revenue the total personnel budget should be around the $650,000 range, or 65 percent. If you get up into the 70s you are going to struggle with profitability. If you get down into the 50s you are probably going to be very profitable,” Burke says. That means the cash portion of an agen-cy’s total personnel budget — not benefits — needs to be in the 50s, Burke adds. Every agency is different, but usually the office and service staff portion of the

personnel budget should be kept in the 30 percent range of that 50, he says. “The way we evaluate an agency’s prof-itability and performance is by looking at what is the salary in relation to the amount of commissions handled? “In a large account world, you can have an account executive making eight to 10 times their pay,” Burke says. “That works well from an expense ratio stance. So if you have someone making $80,000 a year but they are handling $700,000 of income that can work fine for the agency even though that may sound like a lot of money in the old world. Whereas in a small account world someone working really hard is going to have a hard time handling $100,000 to $150,000 of income. …That’s the reason why you can’t be paying produc-ers on small accounts because it’s already a profit drain on the agency.”


Documents

Insurance journal feb 2013 agency compensation