New York — The Risk and Insurance Management Society (RIMS), a New York-based not-for-profit organization dedicated to advancing the practice of risk management, and New York-based Advisen Ltd., a provider of analytics and information services to insurance professionals, released the "Broker Services and Remuneration Study" as part of the 2008 RIMS Benchmark Survey book. The study, based on data gathered in February 2008 from 1,519 participants, 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.
“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" 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 toward fee-based pricing, respondents note a broker trend toward 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 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% in some cases—are willing to purchase if they are offered by their broker. Additionally, there remain significant differences by size of company and industry group in the types of services provided.
The "Broker Services and Remuneration Study" is only available as part of the 2008 RIMS Benchmark Survey 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.
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