Salary Blues

Independent agency salaries maintained or decreased slightly in 2009, but employee morale may be registering at an all time low. And agents don’t expect things to change, at least not anytime soon.

Average Salary Adjustment in 2009

Half of all agencies responding to Insurance Journal‘s Agency Salary Survey say that salaries stayed about the same in 2009 compared to 2008, while another 34 percent said salaries were lower in 2009 than in 2008. Just 16 percent reported salaries in 2009 were higher than 2008.

Stagnant and declining agency salaries have many agency employees singing the blues, says Al Diamond, president of the Cherry Hill, N.J.-based Agency Consulting Group. Employee attitude is bad and employee morale has never been worse, he says.

“The attitude (of the agency employee) is very bad,” Diamond said. “For the most part, the general insurance agency morale has never been lower.”

Agencies also said they will not hire this year. According to the IJ survey, nearly 50 percent said they postponed hiring in 2009, with 43 percent planning again to postpone hiring in 2010. The good news is that more than half (55 percent) reported that staff sizes remained the same in 2009 and most agencies expect that trend to continue throughout 2010.

Agency consultant Chris Burand, owner of Pueblo, Colo.-based Burand & Associates LLC, also sees most agencies maintaining staffing levels, but notes that some might have to make further cuts.

“Some agencies are always looking for quality producers,” he said. But fewer agencies are looking to add producers “not because they don’t want to but because they simply can’t afford it,” Burand says. However, when agencies do have the funds to hire, they will hire more producers. “Other than that, though, I don’t have anybody that’s really looking to add staff.”

According to Madelyn Flannagan, vice president of education and research for the Independent Insurance Agents and Brokers of America, agency owners are still looking for ways to cuts expenses as they have been doing for the past few years.

“Last year and even still this year, a lot of agencies were laying folks off, looking for ways to cut expenses,” Flannagan says. She said she hasn’t heard many Big “I” members begin to hire yet, but agrees that the one area where agencies might hire is in sales, either to replace producers lost to other industries, or to replace retiring producers.

The IJ Agency Salary Survey generated 1,326 responses from independent insurance agencies nationwide, providing insight into who’s worth what in the independent agency system. Demotech Inc., IJ‘s official research partner, provided analysis and input again on this year’s survey results.

Compensation Changes

One thing all agencies seem to be eyeing is how they structure compensation plans today. As the industry continues to battle the effects of the continued soft market and down economy, 88 percent of agencies reported in the survey that the economic recession has affected their business. For many, this meant a hard look at how to further reduce costs, including compensation.

“I think agencies are looking to cut expenses even more in 2010 than they were this time in 2009,” Burand says. Agencies have had to look at restructuring their compensation, across the board. “All the way from what the partners make, down to what the receptionist makes,” he said.

At the producer level, Burand says agency owners simply are looking to reduce the commission percentage paid to producers. Some agencies have resorted to paying producers only on larger accounts. Others have put growth requirements into action in order for the producers to receive a full commission on their whole book.

Agencies are “recognizing that they’ve got to find a way to get the producers out the door and add new accounts on the commercial side.” He believes the decrease in rates is “just so significant that, in some parts of the country, it doesn’t matter how good a job you do, you’ll go broke if you don’t add a lot of accounts.”

Burand says most agencies have a difficult time asking staff to take a reduction in pay, but he has seen many reduce bonuses. “They’re reducing raises. They are asking their staff to maybe do more. And if all that fails, then they’re laying people off and just asking the remaining staff to pick up the slack.”

Burand says agency owners have taken huge hits in pay as well. “The owners are generally just taking smaller bonuses, if any bonuses at all,” Burand says. “Now, they’re maybe only being paid for their books of business — more so than any time in the past 10 years.”

According to the IJ Agency Salary Survey, overall average salary adjustments in 2009 were down for management (-1.2 percent) and sales staff (-0.8 percent). Support staff showed a very slight salary raise at just 0.1 percent. Some 59 percent of agencies postponed raises in 2009, according to the survey, and 46 percent said they will postpone raises again in 2010.

There is some hope. Agencies that have been thinking outside the box on compensation kept up employee morale last year, Diamond says. In agencies where compensation is tied directly to productivity for every employee, morale and profits are higher, he said. “So the employees themselves start pumping up the volume, trying to increase their productivity because they know if they increase their productivity in those agencies, they can actually give themselves a raise.”

But for the vast majority of agencies, employee morale is suffering because agencies and their support staff continue to do more with less.

“Agencies may have 10 people instead of 11, but they’re expected to do more work,” Diamond says.

Burand adds that many agency employees today may not understand the severity of the situation and why agency owners are making such cuts, further adding to bad morale.

“Sometimes employees have their own stresses that keep them from understanding. In some cases, the agency owner just hasn’t explained it adequately, and in other cases they feel that they are doing more than their share of work,” Burand says.

“Agency personnel are being asked to do more work both by the carrier and by their agency owners,” Flannagan added.

More work for less money or the same money has upset some agency employees but has not driven them all away. Burand says that so far he hasn’t seen agency employees look elsewhere for work.

However, the reaction of producers has been different. Burand says he has seen many producers searching for new agencies. “I’ve never seen so many producers jumping ship in my life,” he says.

Diamond says he sees a lot of producers on the market as well, but sees less transition of high quality people. “Everybody appears to be holding on, feeling that what they’ve got now is as good as they’re going to have until the market turns,” Diamond says.