Cry
Babies?
"Power To Agents" #6
Commission Reduction and Ownership of
Business--Concern to you?
by Dean Auten
auten@compuserve.com
The Georgia Insurance Agents Alliance (GIAA) and the National Auto
Insurance Agents Alliance (NAAA) has had positive and negative responses
to their criticism of companies that drastically reduce agents' renewal
commissions. From a positive viewpoint, NAAA has had several companies
make favorable responses. Surprisingly the negative comments have come
from MGA's--in Florida, California and Georgia. MGA's should be
supportive of the GIAA/NAAA position. If agents continue to find it
necessary to join with larger agencies or go out of business, MGA's,
which have been a placement home for smaller agents for years, will be
hurt. MGA's have, because of volume, been able to negotiate favorable
contracts.
Lose that volume and they will be like those of us that call ourselves
"Just Agents".
Agents have been supportive but few are willing to say it out loud. One
letter received by NAAA was from an agent that had four companies cut
his renewal commission.
Commission reduction has become a plague to agents spreading fast as one company after another is successful.
From 15% to "0" in some cases. In another 15% to 1%, etc.. One New York
agent is being forced to service a $11/2 million book of business
without compensation from the company. There are Georgia agents now
servicing business without compensation! You may not have that problem
now but are you willing to ignore the problem of your fellow agents
when, if history is correct, there will be more agents in their
position? It hasn't happened to me yet but if (when?) it does, you can
bet there will be tears. Should we send them a thank you letter for
taking 1/3 or more of our income?
Another MGA comment was, "The insurance market place is part of the
American Free Enterprise System and a company should be permitted to
change an agent's renewal income -- even to zero". How does that sound
to you? I must admit I was surprised at the response. I would like to
hear from agents and company representatives. Is our group just being
cry babies? Free Enterprise?
Insurance is a regulated industry -- even more than Banks. If we were
free enterprise, agents could charge fees (Banks can) and companies
would not have to have regulatory approval of rates and forms.
At the 2001 Expo, Representative Rich Golick answered the question, "Is
insurance part of the free enterprise system", with a resounding No".
Representative Golick is a member of the House Insurance Committee that
will have hearings on modernization of Georgia's Rate making process.
Our cry babying group plans to do all we can to see that changes are
made. The current system is broken. Companies are leaving Georgia
because they cannot get regulatory relief. After companies take away
agents' commission and they are still losing money, they will leave (the
one I know that is leaving did not take away commissions first. I don't
represent them but they are an agent friendly company. We are losing a
good company).
Agents should be actively supporting change in the current regulatory
rate process. Representative Golick mentioned the South Carolina 7%
debit/credit that companies can make without prior approval.
In my opinion 7% is not enough now. We should support Open File and Use
and let the market and competition set the proper rate. Contrary to what
some people think, companies will not file for excessive rates because
if they do, the market will leave them. All we want is for companies
(and agents!!!) To make a fair profit. If we can't get file and use, I
would hope they would consider 15% debit/credit. We have a precedent in
Georgia since we have the 15% debit/credit in place now on Commercial
insurance. If I am correct (they could have changed the law -- they
frequently do make changes -- if I am wrong and knowing a few of the
readers of FYI, they will correct me in next issue), companies that take
the increase must send 45 day notice of the increase -- that should not
be a problem.
Your help is needed! GIAA will be letting Legislators know they want to
see changes in the rate approval process but your talking to your
legislators will do more than any association or company can do. Do it
now -- please!
If you are an agent and not a GIAA/NAAA member, send an e-mail to
Membership Chairman Todd K. Gill at gillatl@yahoo.com for membership
information and application. Dues ($150) paid this year cover remainder
2001 and all of 2002 dues.
That is one thing I'm positive about!
|