SOURCE: Ward Group

Ward Group

June 14, 2010 10:18 ET

Insurance Companies Manage Employee Compensation to Minimize Staffing Reductions

CINCINNATI, OH--(Marketwire - June 14, 2010) - Ward Group, a consulting firm specializing in the insurance industry and the leading provider of benchmarking practices, in partnership with the Property Casualty Insurers Association of America (PCI) recently published its findings from an in‐depth study of Human Resources Practices and Employee Benefits for property‐casualty insurance companies. The study focused on compensation, health insurance, retirement plans, and other benefit offerings for the insurance industry for 2009 and 2010 projected for a diverse group of 117 property-casualty companies. Key findings were presented by Jeff Rieder, President of Ward Group, at the annual PCI HR Conference in Seattle on April 14, 2010 and in a webinar hosted to participants on May 10, 2010.

For most property‐casualty insurance companies, employee compensation is a large expense item to be actively managed. Employee compensation represents approximately 30% of the average property-casualty company's underwriting and loss adjusting expenses. As the cost of benefits increase and the soft market continues, most companies are reviewing the structure of employee benefit plans and other compensation to manage expenses. Ward Group and PCI conducted the HR Practices and Employee Benefits Study to help companies benchmark their employee benefit plans and its impact on employee compensation.

The study identified the following observations regarding staffing projections for 2010, including:

  • Average full‐time equivalents is projected to increase 0.8% in 2010.
  • Nearly 25% of companies reported they intended to have employee layoffs in 2010, although at lower rates than 2009. The average reduction in force due to employee layoffs was projected to be 1.6% of staff in 2010, down from 4.0% in 2009. 
  • Despite the employee reductions, only 14% of companies have completely frozen hiring for all positions for 2010. In addition, 26% of companies are adding staff only to fill open positions while 60% are adding new positions.

Total compensation per employee in 2010 is projected to increase 2.0% with increases in ordinary compensation, incentive compensation, retirement plan funding, major medical expenses and other benefits expense. Several key practices were identified that companies have used to minimize growth in employee compensation expenses.

  • Merit increases have decreased from 2009 to 2010 and are 30% lower than 2008.
  • 20% of companies have frozen salaries for 2010 and 3% are considering it for the future.
  • Employer health care contributions have decreased considerably over the past decade. Since 2004, the average company has reduced health care contributions by 5% requiring the employee to pay for more of these costs directly and absorb the increases in total health care costs.
  • Health care offered to retired employees has declined by 30% since 2006.
  • The number of companies offering a defined benefit pension plan has decreased 27% since 2006. In addition, 40% of companies with a defined benefit plan have frozen the plan to new entrants.
  • Training expenses in 2009 were 50% lower than 2008, driven largely by declines in external training.

In closing, Mr. Rieder projected expense deterioration to continue through 2011. Ward Group does not expect large scale staff reductions in 2010 but expects more changes to employee compensation and further reduction in benefits. Based on these compensation changes, Human Resource departments are focusing more on employee engagement and other strategies to provide low cost benefits to boost employee morale and production. 

To obtain complete results of the HR Practices and Employee Benefits Study, including detailed benchmarks by company size and geographic location, visit www.wardinc.com.

About Ward Group®

Ward Group is a consulting firm specializing in the insurance industry and the leading provider of industry benchmarking and best practices services. Ward Group analyzes staff levels and expenses for all areas of insurance company operations. For more information about Ward Group and the Ward Research Center, visit www.wardinc.com.

Contact Information

  • Contact:

    Betty Cornelius
    Director, Marketing
    Ward Group
    +1 (513) 746 2404
    Email Contact