Survey Finds Agency Nonproducer Pay Shifts

Survey Finds Agency Nonproducer Pay Shifts

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

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

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

The consulting firm said another major trend is that a growing number of agencies are paying closer attention to total compensation, spurred on by the growing cost of healthcare coverage.

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

"Certainly training existing and new hires is an important way to avoid the salary spiral brought on by offering large pay increases to lure seasoned personnel from other agencies," she noted.

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

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

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

The study found a clear trend in compensation is a shift towards variable pay related to business results and meeting individual objectives.

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

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

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

As an example of goal-based incentive plans for managers, she said a commercial lines manager could have compensation tied to net growth of their department and business retention, the agency's overall growth and profit, and meeting goals for a department?such as implementing imaging or scanning.

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

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

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

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

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

BMG's survey is available for $99 plus $6 shipping and handling. More information is available from Business Management Group at 800-772-0208 or www.bmgconsulting.com.

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

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