Producer Compensation Practices for U.S. Insurance Transactions
All of the members of the Chubb Group of Insurance Companies doing business in the United States* (hereinafter "Chubb") distribute
their insurance products through licensed brokers and agents ("producers"). The following is a brief overview of the types
of compensation paid by Chubb to these producers. Additional information may be available from the producer.
This overview focuses on U.S. insurance transactions. Thus it does not provide information about Chubb's producer compensation
practices for insurance transactions in other parts of the world where Chubb does business. The purpose of this overview
is to provide information about the costs associated with Chubb's distribution of its insurance products.
Standard Commissions
Chubb usually pays its producers a commission for each insurance policy they sell. This "standard" commission is a percentage
of the premium charged to the insured for the policy. The amount of standard commission depends on the type of insurance
product sold. Chubb offers a wide variety of products, and therefore pays a wide range of standard commissions, which can
vary from transaction to transaction based on the size and complexity of the transactions. Please click here to see detailed information regarding the range of commissions Chubb pays.
In some insurance transactions, an insurance producer may charge the customer a fee in lieu of receiving a standard commission
from the insurance company. In other transactions, where specialized expertise or access to surplus lines markets is needed,
the customer and its retail producer may engage an additional "wholesale" producer. Where a wholesaler is involved in an
insurance sale, an increased standard commission typically is paid by Chubb (normally an additional 5%) and the total standard
commissions paid are divided among the retail and wholesale producers pursuant to arrangements made between them. You should
consult your producer if you have questions regarding the details of such an arrangement.
Guaranteed Supplemental Compensation
In addition to standard commissions, producers also may receive guaranteed supplemental compensation ("GSC") from Chubb, which
consists of an additional commission percentage on eligible business. Eligible lines vary by year. Each qualified producer's
GSC percentage is fixed at the beginning of the calendar year, based on its performance (in terms of growth, retention and
profitability) in the prior year. This percentage remains fixed for all policies written during the year and is payable in
lump sum in January of the following year.
For 2011, Chubb will pay between 0 - 11.3% GSC on commercial policies and 0 - 11.7% on personal policies. Approximately 90%
of producers will earn between 0 - 4.0% GSC on commercial policies and 0 - 5.0% GSC on personal policies.
Contingent Commissions
Until January 1, 2007, producers were eligible to receive a "contingent" commission from Chubb. As the name suggests, a producer's
eligibility for, and the percentage and amount of, contingent commission a producer earned in a given year was contingent
on the producer meeting pre-established goals for profitability, retention and/or growth standards for all of the policies
it placed with Chubb during that year. If, in a given year, a producer did not meet its growth, retention and/or profitability
requirements, that producer was not eligible for a contingent commission. Because the amount of contingent commission earned
on the sale of an individual policy during the year was dependent on the producer's future conduct over the course of the
entire year, that amount was unknown at the time of sale.
As of January 1, 2007, only exclusive distributors of Chubb products, i.e., producers that market only Chubb policies in a particular line of insurance, are eligible for contingent commission.
Additional Compensation
Chubb may enter into relationships with a licensed producer whereby the producer provides additional services on behalf of
Chubb. In these instances, the producer may perform some underwriting or administrative services, such as policy issuance,
for which additional compensation beyond standard commission or GSC is appropriate. Such arrangements represent a very small
portion of Chubb's overall business.
Chubb may give its producers complimentary items of nominal value. These items are generally not based on profitability or
growth but rather are typically in the form of marketing items to promote new products and programs. Additionally, Chubb
may pay for professional continuing education for producers. Chubb also may pay for meals with and other entertainment expenses
for producers that are customary in most business relationships.
It is also common in the industry for producers who collect premium from insureds on behalf of insurers to deposit such premium
in interest bearing trust accounts and retain any interest earned before remitting such funds to the insurer. Chubb permits
this practice, provided that the producer meets its contractual payment obligation to Chubb. Further, the producer must comply
with any applicable disclosure or other regulatory requirements associated with this practice.
As of January 1, 2007, Chubb will not loan money to a producer unless the producer agrees to disclose the loan in writing
to any insured purchasing Chubb insurance through that producer during the term of the loan.
Other Important Information
This overview provides information about how Chubb U.S. insurers currently compensate their producers. Because this is an
overview, there are exceptions not addressed within the scope of this discussion. If you would like additional information
about a commission paid on your policy, please contact your producer. Also, please check this website periodically for updated
information on this subject.
*See a complete list of Chubb's insurers, including Chubb U.S. insurers, under Chubb Subsidiaries in the About Chubb section of this site.
|
