RIMS, Advisen Release Broker Survey

The Risk and Insurance Management Society (RIMS) and Advisen, Ltd. reported the release of the Broker Services and Remuneration Study as part of the 2008 RIMS Benchmark Survey™—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 a 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 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 as part of this year’s RIMS Benchmark Survey™ book combine to create an invaluable resource for risk managers,” said John Phelps, 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,” added 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™ 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.