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 2014, Chubb will pay between 0 - 7.5% GSC on commercial and personal policies.  Approximately 90% of producers will earn between 0 - 4.0% GSC on commercial and personal policies.

Contingent Commission

Certain producers may be eligible to receive a “contingent” commission from Chubb, which may be offered in lieu of guaranteed supplemental compensation.  The amount of contingent commissions paid to producers generally will be similar to GSC payments.

As the name suggests, a producer’s eligibility for, and the percentage and amount of, contingent commission a producer may earn in a given year would be 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 does not meet its growth, retention and/or profitability requirements, that producer would not qualify for a contingent commission.  Because the amount of contingent commission earned on the sale of an individual policy during the year would be dependent on the producer’s future conduct over the course of the entire year, the amount that ultimately may be paid would be unknown at the time of sale. 

Additional Compensation

Compensation for Services—Chubb may enter into relationships with a 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, contingent commission, or GSC is appropriate.

Individual Producer Incentive Awards—Chubb may provide individual producers and customer service representatives employed by an agency with incentives for participating in sales contests.  These incentives may be in the form of cash or non-cash awards based on the number of policies written, number of quotes obtained, or other performance objectives established by us.

Marketing and Other Support—Chubb may provide certain producers with other benefits, including but not limited to items such as professional continuing education, training expenses, lead generation services, advertising assistance, sales and business meetings, and other services that help the producer promote Chubb and our products.

Interest on Premium Collected—It is 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.

Loans—Chubb may provide producers with loans which are interest free or which are carried by Chubb at a market or below market interest rate.  These loans are generally made available to key producers for agency support, acquisitions or system upgrades.  In some cases, Chubb may provide a producer with loan forgiveness in return for placing or retaining business with Chubb. 

Special Compensation Arrangements—Additional commission payments may be paid to producers where Chubb is provided with an opportunity to quote on all or a portion of a producer’s book of business, or where Chubb is placed in a group or list of preferred or strategic insurers to whom a producer will provide greater quoting or sales opportunities.  Commission also may be increased for business in certain lines and/or classes during defined promotional periods.

Producer-Owned Captives—Certain business written by Chubb underwriting companies may be reinsured by an entity in which the producer of the business has an ownership or other financial interest, known as a producer-owned captive.  These producers participate in the underwriting profitability or loss on such reinsured business.  Producer eligibility may vary by state.

Policyholder Services—Chubb may make available various policyholder services to certain producers with or without charge to the producer.  When a fee is charged to a producer for such services, it also may be waived based upon the producer meeting certain production or other performance objectives established by Chubb.  Fees charged for such services generally are offset against commissions payable to the producer and therefore result in a reduced commission being reported on policies issued through the producer.

Other Benefits—Chubb may provide producers with other benefits, including but not limited to meals, entertainment expenses, tickets to sporting events, travel, gifts, branded merchandise, and attendance at corporate-sponsored meetings, including transportation, accommodations and meals.

Endorsements—Chubb may pay compensation, including endorsement fees, royalty fees, and administrative services fees, to associations and other entities that endorse Chubb and promote the sale of Chubb products and services.

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.