Survey Finds Agency Nonproducer Pay Shifts

NU Online News Service May 23, 12:15 p.m.EDT?The trend for non-producer compensation at independentinsurance agencies has shifted towards variable pay related tobusiness results and meeting individual objectives, a consultingfirm study has found

The survey by Business Management Group, entitled "2003-2004Non-Producer Compensation & Benefits Study,'' also found thatagencies have shifted emphasis to training up existing staff ratherthan paying high salaries for outside talent.

BMG, a subsidiary of The Hartford Financial Services Group,Hartford, Conn., said its findings were based on responses frommore than 400 agencies and brokerage firms nationwide.

The consulting firm said another major trend is that a growingnumber of agencies are paying closer attention to totalcompensation, spurred on by the growing cost of healthcarecoverage.

In Atlanta, Suzy Hammett, BMG vice president and author of thesurvey, said, "The cost of healthcare coverage for many firms isprojected to average nearly 25 percent of wages in less than fiveyears." As a result, she said, firms are evaluating the cost ofhealthcare and retirement benefits before deciding how much toaward in raises.

"Certainly training existing and new hires is an important wayto avoid the salary spiral brought on by offering large payincreases to lure seasoned personnel from other agencies," shenoted.

Ms. Hammett said that when the survey asked firms abouteducation benefits that were provided, two years ago the number offirms providing education assistance was in the 70 percent rangeand that level has risen to 80 percent.

While most salaries have increased by 6 to 8 percent, meansalaries for operations and sales managers have gone up by 18percent since the last survey in 2001, the survey found.

It also determined that for employee benefits lines customerservice representatives, mean salaries have increased 17 percent inthat two-year period. Overall for service, marketing, claims andaccounting staff, salaries did not increase but remained stable.Ms. Hammett said the operations and sales managers and benefitsCSRs salary levels were "the exception."

The study found a clear trend in compensation is a shift towardsvariable pay related to business results and meeting individualobjectives.

In 1999, BMG said it found that 47 percent of participatingagencies offered incentive plans to managers, while today thatnumber has grown to 82 percent.

Today, the percentage of companies that offer incentives tonon-manager staff has held steady at a significant 74. Also, 56percent of the participants reward managers based on specificperformance objectives, and more than 18 percent offered long-termincentive plans to managers.

Ms. Hammett said this shift in agencies' compensation strategiesis leading to more sharing of profits with non-producer staff. As aresult, she said while base salaries may not have shown muchincrease, total compensation for some has gone up.

As an example of goal-based incentive plans for managers, shesaid a commercial lines manager could have compensation tied to netgrowth of their department and business retention, the agency'soverall growth and profit, and meeting goals for a department?suchas implementing imaging or scanning.

Most U.S. survey participants indicated their plannedcompensation increases this year will be between three and 5.7percent, with the Southwest accounting for the highest anticipatedincrease, and the Northeast the lowest.

Projected increase rates for 2003 are slightly higher than 2002actual increases, indicating agents and brokers' concerns about alack of available talent and the need to remain competitive, BMGsaid.

The survey, which BMG has been doing since 1990, comparesmanager and non-producer compensation by region, agency size, andwhether the agency is in an urban, suburban or rural location.

A total of 32 agency and brokerage firm positions are examinedin the survey?including management (e.g., COO, commercial linesmanager); sales and marketing (e.g., sales manager); service andsupport (e.g., CSRs by line of business); financial (e.g.,controller); automation (e.g., network manager), and riskmanagement (claims specialist).

The survey is conducted every two years. BMG said it is endorsedby the Independent Insurance Agents and Brokers of America as oneof their Best Practices Tools.

BMG's survey is available for $99 plus $6 shipping and handling.More information is available from Business Management Group at800-772-0208 or www.bmgconsulting.com.

BMG, a subsidiary of The Hartford, is a management consultingfirm based in Hartford, Conn., that provides consulting services toinsurance agencies and brokerage firms in the United States andCanada. The Hartford is one of the nation's largest investment andinsurance companies with assets of $188.7 billion.

BMG also publishes a separate survey of agency owners,executives and producers in alternate years.