2017 EPP PPT - NAMIC
Transcript of 2017 EPP PPT - NAMIC
2017 NAMICEXECUTIVE PAY PRACTICES STUDY
COMPILED BY WARD GROUP SPONSORED BY
EXECUTIVE SUMMARY
CORPORATE SPONSOR
TheJacobsonGroupistheleadingglobalproviderofinsurancetalent.For45years,wehavebeenconnectinginsuranceorganizationswithprofessionalsfromtheboardroomtothebackroomonbothapermanentandtemporarybasis.Weofferavarietyofsolutionsincludingexecutivesearch,professionalrecruiting,emergingtalent,RPO,temporarystaffing,subjectmatterexperts,andonsiteandwork-at-homeoperationssupport.
Jacobson’smarketplacelongevitycreatesanextensiveindustrynetwork,auniqueinsider’sperspectiveandareputationforexcellence.Regardlessoftheneedorsituation,Jacobsonistheinsurancetalentsolution.
Formoreinformation,visitwww.jacobsononline.com.
WardGroup,apartofAonplc(NYSE:AON),istheleadingproviderofbenchmarkingandbestpracticesstudiesfortheinsuranceindustry.Weanalyzestafflevels,compensation,businesspracticesandexpensesforallareasofcompanyoperationsandhelpinsurerstomeasureresultscomparedtopeergroups,optimizeperformanceandimproveprofitability.Since1991,wehaveperformedmorethan2,500operationalandcompensationbenchmarkingexercisesforcompaniesofallsizes,including morethanhalfofthetop100U.S.insurancecarriers.
Formoreinformation,pleasevisit www.wardinc.com.
IN PARTNERSHIP WITH
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NAMICisthelargestproperty/casualtyinsurancetradeassociationinthecountry,withmorethan1,400membercompaniesrepresenting39percentofthetotalmarket.NAMICsupportsregionalandlocalmutualinsurancecompaniesonmainstreetsacrossAmericaandmanyofthecountry’slargestnationalinsurers.
NAMICmembercompaniesservemorethan170millionpolicyholdersandwritemorethan$230billioninannualpremiums.Ourmembersaccountfor54percentofhomeowners,43percentofautomobile,and32percentofthebusinessinsurancemarkets.
ThroughouradvocacyprogramswepromotepublicpolicysolutionsthatbenefitNAMICmembercompaniesandthepolicyholderstheyserveandfostergreaterunderstandingandrecognitionoftheuniquealignmentofinterestsbetweenmanagementandpolicyholdersofmutualcompanies.
NAMICHEADQUARTERS NAMICWASHINGTONOFFICE3601VincennesRoad 122CStreet,N.W.Indianapolis,IN46268 Washington,D.C.20001(317)875-5250 (202)628-1558
www.NAMIC.org
SpecialthankyoutoNAMIC’sPropertyCasualtyConferenceBoardofDirectorsforitsleadershipandsupportofthisproject.
NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES
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MattMooreExecutiveVicePresidentShelterMutualInsuranceCompany
Christine(Chris)Sears,CPCU,CPAPresident&CEOPennNationalInsurance
DarinNessel,CIPPresident&CEOTheMutualFireInsuranceCompanyofBritishColumbia
PhilFraimPresident&CEOOklahomaAttorneysMutualInsuranceCompany
DaveGrossPresident&CEOSECURAInsurance,AMutualCompany
Liason toNAMICBoardMarieJewettPresident&CEOCo-operativeInsuranceCompanies
StaffLiaisonKristenL.SpriggsSeniorVicePresidentMemberDevelopmentNAMIC
ChairmanMichaelWenos,CPCUPresidentMadisonMutualInsuranceCompany
Chairman-ElectJillWagnerKellyPresidentIntegrityMutualInsuranceCompany
ImmediatePastChairmanRobertZakPresident&CEOMerchantsMutualInsuranceCompany
ViceChairmanDaveKaufmanPresident&CEOMotoristsMutualInsuranceCompany
JosephDeChatelets,CPCUPresident&CEORockfordMutualInsuranceCompany
JeffWrobel,CPCUPresidentMutualAssuranceSocietyofVirginia
AffinityMutualInsuranceCompanyBrotherhoodMutualInsuranceCompanyBuckeyeStateMutualInsuranceCompanyCameronMutualInsuranceColumbiaInsuranceGroupCopperPointMutualInsuranceCompaniesCoverysCumberlandInsuranceGroupFarmersMutualFireInsuranceCompanyofMarble,PAFarmersMutualHailInsuranceofIowaFrankenmuthMutualInsuranceFranklinMutualInsuranceFrederickMutualInsuranceCompanyGrangeInsuranceAssociationHochheim PrairieFarmMutualInsuranceAssociationIslandInsuranceCompaniesJewelersMutualInsuranceCompanyLititzMutualInsuranceCompany
MarysvilleMutualInsuranceCo.MerchantsInsuranceGroupMMGInsuranceCompanyMutualBenefitGroupOhioMutualInsuranceGroupPekinInsurancePreferredMutualInsuranceCompanySECURAInsuranceSFMMutualInsuranceCompanyShelterInsuranceCompaniesSocietyInsuranceSynergyCompInsuranceCompanyTheHarfordMutualInsuranceCompanyTheNorfolkandDedhamGroupVermontMutualInsuranceGroupWayneMutualInsuranceCompanyWesternNationalInsuranceGroup
EXECUTIVE PAY PRACTICES STUDY – KEY FINDINGS
PARTICIPANTS
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EXECUTIVE PAY PRACTICES STUDY – KEY FINDINGS
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The“futureofwork”hasbecomethenewbusinessreality.Nolongerjustabuzzword,theindustrystandsamidaneconomiccyclewheretheworkplaceisinaconstantstateofflux.Existingtrendsandemerging“normals"areacceleratingandirreversiblychangingtheworkforceasweknowit.
Thebusinessworld—andtheinsuranceindustry,inparticular—isattheonsetofmomentoustransformation.Thefutureofworkisincreasinglycomplex,cutting-edgeandmarkedlydifferent.Onlythoseorganizationswhoreadilyembracethesechangeswillbeabletosuccessfullycompeteinthisnewreality.
THE FUTURE OF WORKToday’snewworkenvironmentistypifiedbyanincreasedlevelofcomplexityandinterconnectedness.ThisemergingworkplaceischaracterizedasVUCA—volatile,uncertain,complexandambiguous.Originallyconceivedasamilitaryacronym,thisterminologyisaperfectdescriptor forabusinessworldthatisinaconstantstateofchange.
Volatility seeschangehappeningrapidlyandonalargescale.Thisincludesevolvingtechnology,emergingautomationandartificialintelligence.Uncertaintyreflectsafuturethatisnolongerabletobepredictedwithprecisionduetoemergingrisksandchangingdemands.Complexity isbeingdrivenbychallengesthatincreasinglyhavemultiplefactorsandfewsinglesolutions.Ambiguity isseenwithindustryeventsandchangeswhoseeffectsareunknown.Thisspansfromtheriseofthe“blended”workforceofpermanentandtemporaryprofessionalstotheflatteningoforganizationalhierarches andtheemergingcorporatelattice.
Inordertofindsuccessinthisrapidlytransformingenvironment,we—asanindustry—mustunderstandthepersonal,organizationalandsocietalimpactofthesechangesandadapt.Onlybyrethinkingcurrentstrategiesandredefiningtheirrealitiescanforward-thinkingorganizations successfullymoveintothefuture.
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LEADERSHIP IN AN EVOLVED INDUSTRYThefastpaceoftoday’sfutureworkforcerequiresanewtypeofleadership.Reflectingtheevolvingbusinessenvironment,thecompetenciesorganizationsrequirearechanging.Asinsurersfocusonredesigningtheirorganizationstobemoredynamic,team-centricandconnected,theyarelookingforagileleaderswhocanmobilizeandexecutethesemodels.
Thesenewleadersmustbeabletosolvecomplexproblemsacrossboundaries,driveaneco-systemoflearningandcontinuousimprovement,allwhilekeepingabroaderworkforceofemployees,gigcontractors,contingentworkersandfuturetalentconnectedandengaged.
Thisiscertainlyatallorderthatrequiresnewcompetencies,abilitiesandattributes.Drivenbyaninnovativedevelopmentapproachthatblendsbothhorizontalandverticalleadershipdevelopment,theseagileleadersareabletobuildnewcapabilities,aswellasexpandtheirpersonalworldviews.Theyareadaptable,creativeandversatile.Theyareself-aware,networkedandcollaborative.Theyareabletoinspire,managecomplexity anddevelopculturesthatareconducivetosuccessintoday’srapidlychangingenvironment.
Thesetalentedindividualsarekeytodrivingtransformationandnavigatingtheworkplaceofthefuture.Unfortunately,insurers arecompetingagainstanumberofindustriesforthesehighly-talentedandsought-afterleaders.
Asthe“warfortalent”rages,compensationisacriticalcomponentindifferentiatinginsuranceasanindustryofchoice.Increasingly,thewider“hiddenpaycheck”ofemployeebenefitsandlifestyleperksisbeingconsideredbyprofessionalswhenmakingcareerdecisions.Incentiveprograms,professionaldevelopmentopportunities,disabilityincomeprotectionsolutionsandcarriedinterestplansarealladditionsthataddvalue to acompensationpackage.
TheJacobsonGroupishonoredto—onceagain—sponsorthe2017NAMICExecutivePayPracticesStudy.Thisstudyprovidesarobustviewandinsiderlensintocompensationbestpracticesandstrategies,includingsalaryandincentiveprogramsandperformanceplanguidance.We,asanindustry,shouldusetheseinsightsaspivotpointsfromwhichwecanbuildaneffectiveframeworkforacompetitive,compellingandreal-worldexecutivecompensationstrategy.Onlybydisruptingthestatusquoacrossallbusinesspractices—includingourcompensationstrategies—willwebeabletothriveintoday’sfast-pacedreality.
EXECUTIVE PAY PRACTICES STUDY – KEY FINDINGS
WardGroupispleasedtobepartneringwithNAMICandTheJacobsonGrouptoconductthisyear’sExecutivePayPracticesStudy.WhenusedinconjunctionwiththeProperty/CasualtyCompensationSurvey,participantsunderstandthecompletepictureoftheexecutiveteam’stotalcompensationpackage,includingactualmarketcompensationforexecutivepositionsandthemeasuresandcomponentsofperformance,funding,andperquisitesfortheseroles.
Thirty-fivecarriersparticipatedinthestudy,providingextensivedataregardingorganizationalstructure,compensationplanning,incentivecompensationdesign,andadditionalbenefitsofferedtoexecutives.Tofurtheranalyzetheresults,fourbenchmarkgroupswheredeveloped.
Belowisabriefsummaryofthestudyfindings.ThefullreportisavailableforpurchasefromNAMICandWardGroup’swebsites.
COMPENSATIONPLANNINGANDCOMPETITIVENESSAmajorityofparticipatingcarriersfelttheirexecutivecompensationprogramswerebothcompetitivewithintheindustryandadequatelyhelpedthemattractandretainkeytalent.However,only17%ofrespondentsstronglyagreedthattheplanwascompetitive.
Whilemanycarriersbelievetheirprogramsarecompetitive,onlyone-thirdofparticipantsreportedthattheydonotreviewtheirexecutivecompensationstrategyonafrequentbasis(bi-annuallyorannually).WardGroupconsidersitabestpracticetoreviewexecutivecompensationstrategyonatleastabi-annualbasisforanumberofreasons.Frequentreviewofcompensationisusefulindeterminingwhethercurrentperformancetargetsareinlinewithrelativeindustryperformanceandaconsistentprocesshelpsreducetensionamongstseniormanagementregardwhethertheirpaylevelsarefairagainstthemarketandperformanceofthecompany.
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EXECUTIVE PAY PRACTICES STUDY – KEY FINDINGS
COMPENSATIONAfterafewyearsoflowtoflatbasecompensationincreasesforexecutivemanagementpositions,in2017,carriersweremorelikelytoincreasetheirexecutives’basecompensation.CEObasecompensationincreasedonaveragebymorethan5%andallothermanagementlevelssawaverageincreasesslightlyhigherthan4%.
While2016financialresultswereworsethan2015fortheP&Cindustry,withacombinedratioof100.5,surveyedcompaniesoutperformedpeerswitha95.7.Carrierperformanceresultedinannualbonusesthatfellinlinewithorabovetargetsformostseniormanagementpositions.Forthosecompaniesthatwerehighperformersin2016,CEOannualbonuseswere23%higherthantarget;andannualbonuseswere26%higherthantargetfortheotherexecutivemanagementpositionsinthisbenchmarkgroup.
Long-termincentiveprogramswerelessprevalentatparticipatingcarriersthanannualbonusplans.Only49%ofparticipatingfirmsindicatedhavingalong-termincentiveplaninplaceforseniormanagement.Theseplans,whichvestovera3-5yearperiod,typicallyreliedonfewerperformancemeasuresthantheannualbonusplanandweremorefocusedonfinancialreturns,suchassurplusgrowthorreturnonequity.Theseprogramshaveshowntobeimportantretentiontoolsforkeyexecutives.
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EXECUTIVE PAY PRACTICES STUDY – KEY FINDINGS
CarriersizehadthemostpronouncedimpactonoverallcompensationdistributionfortheCEOposition.Ascarriersizegrew,the percentof“at-risk”orincentivecompensationbecamesignificantlylarger.CEOsatsmallcarriershadonaverage35%oftheircompensationat-riskcomparedto47%atlargecarriers.SimilartrendsalsowerenotedattheSVP/EVPlevelandVPlevel.
ADDITIONAL BENEFITSBenefitsbeyondcompensationarealsoanintegralpartofexecutivetotalrewardsprogramsandcanhelpattractandretainkeytalent.Theuseofbenefitssuchasdeferredcompensation,supplementalexecutiveretirementplans(SERP),carallowances,andpaidtimeoffprogramswereusedtovaryingdegreesacrossallcarriers.
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62% 53% 65% 49%
38% 47% 35% 51%
OverallBenchmark LargeBenchmark SmallBenchmark HighPerformerBenchmark
CompensationDistribution- CEO
Base Incentive
EXECUTIVE PAY PRACTICES STUDY – KEY FINDINGS