Producer Compensation Practices
The insurance companies that are part of the Intact Insurance Specialty Solutions family of companies (hereinafter “us,” “we” or “Intact”) distribute their products through licensed independent insurance agents and insurance brokers, commonly referred to as “producers.” These producers are generally not our employees. However, they often receive compensation from us for placing insurance with Intact. Depending upon the producer’s business relationship with us, that compensation is in one or more of three forms: standard or base commission, contingent commission and other or additional compensation. An overview of each of these forms of compensation is provided below.
Standard or Base Commission
When new or renewal policies are sold, we pay a fixed or predetermined commission to the producer. The amount of the commission is normally based on a percentage of the premium, although occasionally the commission can be a fixed amount either negotiated with the producer or determined by statute or regulation. During 2005 our standard or base commissions ranged from 0 to 28.5% of premium depending on a variety of factors including the line of business, risk classification, the specific producer and the state where the risk is located. The total standard or base commission paid during 2005 by Intact Insurance Specialty Solutions to all producers was 15% of net direct written premiums for the year. In instances where more than one producer may be involved in the placing of the insurance, such as when a wholesaler or aggregator is involved in the transaction, more than one producer may receive a fixed commission or the fixed commission may be paid to more than one producer.
In addition to fixed commission producers may be eligible to receive a contingent commission, which is payable if the producer meets or has met certain pre-defined profitability goals related to the producer’s book of business with Intact Insurance Specialty Solutions. However contingent commission is not offered on all products or lines of business. Where offered, the applicable annual goals will vary by line of business and may include in addition to a required minimum profit as measured by loss ratio and minimum total premium amounts, a number of factors such as volume of premiums or new business, growth in business with Intact companies or retention of policyholders or premium. If in a given year a producer does not meet the applicable annual goals, that producer is not eligible for a contingent commission and thus receives no contingent commission payment from us.
Contingent commission payments are normally an amount equal to a percentage of eligible premiums placed by the producer with us. The total contingent commission paid during 2005 by Intact to all producers was 1% of net direct written premiums for the year.
Producers may receive other forms of compensation from us such as information technology services and expense reimbursement for such items as adverting, marketing and underwriting expenses. We may pay for, or directly provide, professional continuing education opportunities for producers. Producers may participate in sales contests or promotions based upon the submission of proposed new business to us. Intact may also pay for meals and other entertainment expenses including the travel, meals and accommodations arising from company sponsored events. Payment of other compensation may depend on the producer meeting production and other performance objectives established by us.
Intact may enter into relationships with producers whereby the producer provides additional services on behalf of Intact. In these instances the producer may perform some underwriting or administrative services for which payment of a service fee is appropriate. Such arrangements represent a very small portion of Intact’s producer compensation payments.
Interest on premiums collected by producers on our behalf and placed in interest bearing trust accounts before the premium is paid to us is generally retained by the producer, provided that producers comply with any applicable disclosure or other regulatory or legal requirements.
Intact or its subsidiaries own and operate a small number of insurance agencies. These agencies are listed at “Company Overview”. In addition a small number of Intact employees are licensed insurance agents. These agencies and employees may serve as a producer for Intact as well as other insurance companies not affiliated with Intact. As producers these agencies and employees may be eligible for the similar compensation arrangements as producers not owned by Intact.
This synopsis provides an overview of Intact Insurance Specialty Solutions producer compensation practices. However, because it is only a general overview there may be exceptions not addressed above. If you need additional information regarding specific producer compensation please contact your producer directly. Also, please periodically check this website for updated information.