The Hartford's BMG Insurance Agency Survey Finds Employee Shortage Driving Compensation, Education

HARTFORD, Conn. – While the rest of the economy struggles with worker layoffs, independent insurance agencies are facing a very different problem: filling their jobs with knowledgeable workers. As a result, more firms facing a shortage of qualified workers, have shifted from buying talent, to building talent.

This is one of the top two trends identified by Business Management Group's (BMG's) 2003-2004 Non-Producer Compensation & Benefits Study, based on responses from more than 400 agencies and brokerage firms nationwide. BMG, a subsidiary of The Hartford Financial Services Group (NYSE: HIG), is a management consulting firm specializing in the insurance industry. It conducts and publishes this detailed survey of financial, management, service and other support positions every two years so agencies can benchmark their practices. BMG also publishes a separate survey of agency owners, executives and producers in alternate years.

The second 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.

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

But this approach to cost containment isn't enough. The tight labor market has driven up mean salaries for operations and sales managers by 18 percent since the last survey in 2001. This is also true for Employee Benefits CSRs, where mean salaries have increased 17 percent in that two-year period.

The trend in compensation has clearly shifted towards variable pay related to business results and meeting individual objectives. In 1999, we found that 47 percent of participating agencies offered incentive plans to managers, while today that number has grown to 82 percent. The percentage of companies that offer incentives to non-manager staff has held steady at a significant 74. Today, 56 percent of the participants reward managers based on specific performance objectives, and over 18 percent offered long-term incentive plans to managers.

Most participants in the United States indicate their planned compensation increases for 2003 will be between 3.0 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.

This 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. It focuses on 32 agency and brokerage firm positions 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); Risk Management (Claims Specialist).

This extensive survey is endorsed by the Independent Insurance Agents and Brokers of America as one of their Best Practices Tools and is conducted every two years – enabling BMG to track and report on changing trends. It's available from BMG for $99.00 plus $6.00 for shipping and handling. For additional information, contact BMG at 800-772-0208 or visit www.bmgconsulting.com.

BMG, a subsidiary of The Hartford, is a management consulting firm based in Hartford, Conn., and provides consulting services to insurance agencies and brokerage firms in the United States and Canada. It offers assistance with mergers and acquisitions, compensation and incentive plan design, management and operations analysis, business planning, human resources, sales and sales management, automation and other areas vital to agencies and brokerage firms.

The Hartford is one of the nation's largest investment and insurance companies. As of March 31, 2003, The Hartford had assets of $188.7 billion and stockholders' equity of $9.4 billion. The company is a leading provider of investment products, life insurance and group benefits; automobile and homeowners products; and business property and casualty insurance.