Broker Services and Remuneration Study shows buyers driving brokers toward services, moving from commission to fees; Buyers still waiting for certain placement and non-placement services
April 28, 2008 – SAN DIEGO, CALIF.-The Risk and Insurance Management Society (RIMS) and Advisen, Ltd. announce the release of the Broker Services and Remuneration Study as part of the 2008 RIMS Benchmark SurveyT book. The study-based on data gathered in February from 1,519 participants-has found that insurance buyers are driving brokers to change their service offerings and the way brokers are compensated.
The Broker Services and Remuneration Study is the first comprehensive study of the relationship between commercial insurance buyers and brokers since the industry tumult of 2004-2005. Benefiting from the dynamics of a doggedly soft market in which brokers have shifted the basis of competition to offerings of new services and aggressive pricing models, insurance buyers are demanding a wider array of service options. For the industry’s largest programs, buyers are spending the majority of their broker money on fees instead of commissions, the study reports.
The Broker Services and Remuneration Study documents the current state of the brokerage market with the purpose of enabling risk managers to benchmark broker costs and services, and identifies a number of key trends affecting broker pricing models and new service offerings. Buyers were surveyed on how their brokers are compensated, how much their brokers receive for their services and what types of services their brokers provide.
While virtually all survey respondents continue to use brokers to place insurance programs, the majority agree that brokers are shifting from commissions to fee-based compensation. With this shift towards fee-based pricing, respondents note a broker trend towards supplementing dwindling commission income with added services. The study quantifies the differences in average costs to insurance buyers of fee-based broker remuneration, as opposed to traditional commission-based remuneration.
The study also quantifies services that buyers feel are missing from their brokerage programs. A surprisingly large number of respondents indicate that they do not receive certain Market Placement services within the standard services covered by normal broker compensation. The study also enumerates a string of Loss, Exposure and Financing analysis services, which many buyers–nearly 40 percent in some cases–would be willing to purchase if they were offered by their roker. Additionally, there remain significant differences by size of company and industry group in the types of services provided.
“The Broker Services and Remuneration Study as part of this year’s RIMS Benchmark Survey(TM) book combine to create an invaluable resource for risk managers,” says John R. Phelps, ARM, CBCP, CPCU, member of RIMS Board of Directors and director of business risk solutions for Blue Cross and Blue Shield of Florida, Inc. “This is precisely the type of market intelligence that buyers seek as they navigate the migration to fee-based pricing and witness introduction of new services.”
“Broker fees and services are areas that have undergone tremendous change over the past decade,” says David Bradford, editor-in-chief of Advisen, Ltd. “Most of those changes have resulted from competitive pressures and advances in technology; but some, especially the demise of contingent commissions for large brokers, have been imposed from the outside by regulators and law enforcement agencies. Whichever the reason, today’s soft market has the buyer in the driver’s seat looking at brokers to differentiate themselves through pricing models, service offerings and high-touch relationships.”
The Broker Services and Remuneration Study is only available as part of the 2008 RIMS Benchmark Survey(TM) book. Purchase orders are now being taken for the book online at www.RIMS.org/book. Special discounts apply to RIMS members and survey data contributors.
Insurance professionals use the RIMS Benchmark Survey(TM) to monitor and evaluate programs, help negotiate program costs and design, and navigate the latest risk management trends. Advisen, Ltd., which collects and analyzes the data for RIMS, publishes quarterly updates on premiums and the annual RIMS Benchmark Survey(TM) book. The book adds to the quarterly premium updates with a thorough analysis of total cost of risk per $1,000 of revenue, including what losses were retained by insurance buyers and the change in their costs of administering risk management.
About The RIMS Benchmark Survey(TM)
The RIMS Benchmark Survey(TM) is jointly produced by the Risk and Insurance Management Society (RIMS) and Advisen, Ltd. collects and analyzes the data and provides the technology infrastructure for the survey’s online services. Advisen introduced the “Broker Authorization Letter” that enables Risk Managers and buyers of insurance to contribute to the RIMS Benchmark Survey(TM) by designating their broker to provide the client’s program details. The letter is available at www.RIMS.org/brokerform.
Risk management professionals can also contribute by e-mailing current and prior year policy schedules to B[email protected] .
Risk managers who contribute data to the survey can benchmark the structure of their commercial insurance programs, retained loss costs, exposure demographics and Total Cost of Risk (TCOR) against a highly-relevant group of peer companies. Additionally, survey respondents can use software personalized and configured for their needs to view detailed schedules of insurance, programs for current and past years and full-color program tower charts. Both benchmark charts and program charts download into any presentation for senior management. The results of the RIMS Benchmark Survey(TM) are available online or in an annually-published book. Visit www.RIMS.org/benchmark for details.
About the Risk and Insurance Management Society, Inc
The Risk and Insurance Management Society, Inc. (RIMS) is a not-for-profit organization dedicated to advancing the practice of risk management, a professional discipline that protects physical, financial and human resources. Founded in 1950, RIMS represents more than 4,000 industrial, service, nonprofit, charitable, and governmental entities. The Society serves more than 10,700 risk management professionals around the world. For more information, visit www.RIMS.org.
Advisen, Ltd. equals success for insurance professionals, driving growth and profitability through the broadest platform of analytics and information services. Designed and evolved by risk and insurance experts, and used daily by more than 100,000 professionals, Advisen combines the industry’s deepest data sets with proprietary analytics and applications that drive the risk and insurance lifecycle. Advisen is headquartered in New York with offices in London. For more information, visit www.advisen.com.