Big I Illinois Policy Statement Concerning the Compensation and Appointments of Independent Insurance Agents

Partnerships

By Pat Taphorn, Big I Illinois President

Partnerships are so extremely important in our personal lives and equally important in our business dealings. These also exist with the customers who put their trust in our ability to provide the right professional guidance in protecting what is most important to them.  It is also found in the strong relationships we as agents and agencies have with our carrier organizations.  Finally, it is evident in the affiliation with our association members who have an expectation that those who are charged with leading Big I Illinois will do everything in their power to support their desired outcomes.

With that said, the Big I Illinois Board of Directors have mirrored what has been communicated on a national level and issued a “Policy Statement Concerning the Compensation and Appointments of Independent Insurance Agents.” It reminds our carrier partners of the enormous task we as agents have during this market experience in performing our professional commitment to our customers. We are being challenged to go above and beyond with finding solutions and accessing multiple new market opportunities, while making sure we are continually securing new client relationships to help grow our enterprise. Our ability to retain and maintain premium volume expectations is sometimes hindered and made to be challenging because of underwriting decisions. In these cases and others, we are asking that the carrier partners understand that the outcomes are many times a result of those actuarial guidelines and should not result in the removal of a contractual relationship.  Furthermore, our agency operations continue to realize increases in costs to run our businesses. We are ultimately reliant on the commissions we earn every day in providing the highest level of professional service to our customers.  It would have an extraordinarily adverse impact on our agencies if that revenue source we rely on is reduced to improve carrier results.

In the end, our member agencies need communication from our insurance company partners now more than ever and we would welcome conversations that would prevent any actions that would negatively affect our financial health. Please know that we, Big I Illinois Board of Directors and Staff, continue to promote the strength and importance of the independent agency system and work tirelessly to protect our membership at the same time.

Big I Illinois Policy Statement Concerning the Compensation and Appointments of Independent Insurance Agents

  • The independent agency channel represents the most effective and efficient distribution system of insurance and risk management solutions to consumers. Independent insurance agents handle nearly $1 trillion in direct written premiums annually on a national basis and control 61% of the property and casualty marketplace in Illinois. They educate and assist consumers before coverage is obtained and continue to be their advisors through the insurance lifecycle. The independent agent is typically the first and last resource for the consumer in both hard and soft markets.

  • In addition to the many vitally important services they provide to consumers, independent insurance agencies also provide valuable services to the insurers they represent. These include services related to:

    • Marketing and sales

    • Risk analysis and management

    • Communicating difficult rate and policy underwriting decisions to clients

    • Post-sale service and assistance

    • Policy administration

    • Claims processing

    • Many other aspects and elements of the insurance lifecycle.

  • We are deeply concerned that some insurers have recently reduced agency compensation in a significant manner without thought for the long term and have terminated relationships with agencies altogether. These actions come in the midst of a tumultuous hard market in which consumers are relying more heavily than ever on their agents and as agents too often struggle to find insurers willing to write business and provide customers with much-needed insurance coverages.

  • While we acknowledge the challenges that insurers are facing in the current market, we also believe the practice of reducing agent compensation and terminating agency appointments is misguided. Illinois’ open and competitive rating system allows insurers to plan for additional rate when warranted and without requiring prior approval from state regulators. Finally, given Illinois’ open and competitive market, rates will inevitably go down when the hard market passes. Agency compensation should always be determined on an individual basis between agencies and insurers and should fairly reflect the value that agents provide.

  • The long-term health of the independent agency system depends on insurers compensating agents fairly and adequately and in a manner that reflects the value of the functions and responsibilities performed by agents. In addition, insurers should not delegate new responsibilities to agents without commensurate increases in compensation.

  • The ability of agents to serve the needs of consumers is hindered when insurers inappropriately terminate agency appointments. State policymakers should ensure that there are sufficient guardrails and statutory protections in place that apply if insurers elect to pursue actions of this nature, and agents should communicate any issues they may have directly with companies.

  • The independent agency channel is growing in Illinois and nationally. Insurers have a responsibility to discuss significant actions in advance with their agents. Both agencies and insurers should communicate candidly and respectfully with each other about how best to navigate market change.