Survey: Broker Fees To Decline
NU Online News Service, Dec. 1, 12:58 p.m. EST?In the wake of the insurance brokerage fee scandal industry executives expect to see agents and brokers using a different commission scheme that pays them less, a survey has found. [@@]
That finding emerged in a poll of attendees at the Annual Executive Conference for the Property-Casualty Industry in New York.
Senior directors who were polled said they expect changes in the brokerage and regulatory models to have fundamental and long-lasting effects on the industry, including downward pressure on industry compensation, with pricing likely to increase.
The survey last month found that 86 percent of respondents are expecting a move away from commissions with profitability and volume incentives.
Forty-six percent predict that broker/agent compensation in 2005 will be straight commission with expense reimbursement, and an additional 40 percent predict straight commission with no volume-based component.
Also among survey findings:
? The majority of attendees, 53 percent, thought that given the new regulatory model emerging, federal regulation will receive a big push in the 2005 Congress.
? Regulatory inquiries and public disclosure changes are expected to have an impact on market share among the top five brokers, with 42 percent of attendees predicting that intermediaries will lose market share influence.
? The survey identified a shift in the industry brokerage model, with 56 percent predicting that the new model for global customers will rely on a lower price, fewer profit margins for the underwriter, and complete transparency with the client.
? Early looks at Jan. 1, 2005, reinsurance renewals are most likely to include more competitive directors and officers liability offerings, with overall renewal rates declining worldwide.
Additionally, 74 percent of attendees estimated that 10-to-30 percent of Securities and Exchange Commission registrants in the industry will have a "material weakness" in their Sarbanes-Oxley Section 404 internal control report this year, highlighting additional compliance burdens for the industry.
Seventy percent of those surveyed think that in commercial lines, rates are falling. Premium volume is rising, which has companies writing increased volume.
Lastly, while 41 percent of attendees feel that property and casualty industry operations in 2005 will see "more of the same," an almost equal number, 38 percent, felt that 2005 will have strong companies getting stronger.
The conference is sponsored in part by PricewaterhouseCoopers LLP, Standard & Poor's Rating Services, Sidley Austin Brown & Wood LLP, Cochran, Caronia & Co., and The Black Diamond Group, LLC.
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