Despite efforts by some companies to provide their agents with pay structures that would be less affected by a bad year in the markets, many agents continue to sing the blues about their paycheques. Advisors in this year’s Insurance Advisors’ Report Card collectively lowered their ratings for compensation by more than half a point to 7.2 this year.
It will require more than a raise to put advisor discontent to rest.
Independent brokers and insurance advisors from six companies surveyed this year rated their compensation lower this time round.
Agents from The Co-operators Group Ltd., new to the survey, rated their pay at 7.2, the survey average. Equinox Financial Group stumbled from last year’s 8.0 but still made in a strong showing with an above-average 7.7. State Farm Insurance Cos. lost its first-place ranking but merited a respectable 7.8. Clarica Financial Services Inc. and Freedom 55 Financial agents were most displeased with their compensation, rating it 6.1 and 6.0, respectively — both significantly below last year’s ratings. Only Great-West Life Assurance Co., saw its rating increase — to 7.9 from 7.4 last year — to lead the survey.
The rough market was griped about most by those who are least affected. Clarica’s “lifetime level commissions” is meant to buttress an agent during a bad year. Instead of receiving a lump sum upon the sale of the policy, Clarica agents receive a smaller amount paid annually throughout the life of the policy. “With level commissions, you’re not starting from ground zero every January,” says Jack Garramone, Clarica’s president.
Opinion among Clarica agents, however, is divided. The level compensation package and the “commission on release” buyout package were listed as both the best and worst aspects of working for Clarica.
Under CoR, Clarica guarantees that when an agent leaves the company it will buy the book of business in the form of a salary that continues for 10 years after departure.
The compensation structure is promoted as an incentive for agents to build relationships with their clients. The buy-back program takes care of an agent’s retirement plans and pays for a client to stay on the books. The programs “create an alignment of interest” for the advisor and his or her clients, says Garramone: “The advisor is as well-compensated to serve that client 10 years down the road as he or she is the day the sale is made.”
But some agents feel CoR is a ploy to tie agents and their clients to the company. “They have us by the short and curlies,” says one agent in Ontario. “When you leave, if you try to take your clients with you, you lose your retirement plan.”
The level compensation system also has its critics. One agent feels it has “killed the incentive to sell life insurance. There is no incentive for young guys to drive 50 miles to sell a policy because they won’t see the benefits for a long time.”
Level compensation is not new. Clarica brought it in in 1989, which does not explain the sudden frustration with the system. Great-West Life also uses a level commission structure and its rating did not suffer. The frustrations at Clarica may more accurately reflect agents sense of displacement following the merger with Sun Life Financial Inc.
Commissions elsewhere are not necessarily shrinking but they are harder to come by and there are more claims on them. Agents are seeing their incomes shrink as more and more costs are downloaded to them. “I have to pay office fees even though I work from home,” says one Freedom 55 agent in Eastern Canada. A number of Freedom 55 agents said they are growing disillusioned with owning franchises. Agents at Co-operators, now single-agent contractors, say they miss the support they had in large offices and they find it harder to get head office’s attention. Smaller offices are harder to staff and more expensive to run, with costs now falling to the agents. Co-operators has responded with business management programs, but they are expensive programs to develop.
The principle qualm among independents — who were among the happiest with their lot — is the inconsistency of compensation. It depends on the MGA or the relationship with their suppliers.
Unlike others, State Farm and Co-operators agents rely on property and casualty insurance for the bulk of their business and are suffering from the bad public relations that skyrocketing car insurance rates have cast on their other lines. State Farm agents have the added frustration of being restricted to clients already on the books. As well, many State Farm agents are unhappy the insurer has gone multi-line; they prefer not to sell life insurance and money products and would like to stick to home and auto despite incentives.