Broker/Agent Compensation and Financing

 

The following information is provided in keeping with our ongoing practices of full disclosure and transparency:

The Germania products are available through both captive agents and from insurance brokers. Consumers are generally aware of the difference between buying through an insurance broker, who represents several companies, and purchasing from a single company through a captive agent. We feel distributing through both insurance brokers and insurance agents, allowing consumers to choose which type of representative will meet their personal needs and expectations.

Our broker/agent agreements require that your broker/agent and the Germania Mutual exercise diligence, honesty and utmost good faith in performing their duties. This applys to properly and promptly servicing policies, through communications and other dealings with policyholders.

We compensate brokers/agents in two ways: Firstly, we pay your broker a fixed percentage of the premium you pay. This varies by type of business, as shown in the table below. Secondly, we have an annual contingent profit commission program (CPC) which recognizes brokers for helping us to write profitable business; allowing us to remain well-capitalized to pay claims and to keep our premiums competitive. We have the technical understanding and statistical evidence to know the premium that should be charged for certain types of business and we set prices to compete for that business. CPC rewards those brokers/agents who understand our market expertise and whose insurance portfolio is made up of the kind of business we seek to write.

Neither the Germania nor the broker/agent knows which policy will have a claim, so the objective is to have sufficient policies without claims to pay the claims of the rest.

At the Germania, contingent profit commission is payable after the end of a calendar year and it is based mainly on the profitability of the broker/agent’s total portfolio of business. The amount payable also takes into account the amount of business we transact with the broker/agent and the split of business (Property vs. Automobile) in their individual portfolio. The total contingent profit commissions we will pay in any year will not exceed 4% of the Germania written premium for that year on property business and a maximum of 2% on Automobile business.

The priority of the Germania is to meet the obligations of our policyholders, who are our only shareholders. In addition to ensuring full entitlement to the coverage contracted when there is a claim, our responsibility to policyholders extends to prudent management of future costs so that pricing is stable and reasonable. This is essential for strong corporate governance, effective management and a reasonable return on the capital invested, enabling us to meet our commitment to our policyholders. Insuring farms, homes, automobiles, and businesses that we price accurately is fundamental to meeting these commitments.

To date loans have only been made to support our captive agents in the development of their agency businesses including the acquisition of other agencies, start up loans or for succession – where one agent may buy out the interests of a retiring colleague. Many agents find the bank or private non-insurance company financing difficult to obtain or available only on punitive terms because lending institutions do not always recognize the full value of the agent’s principal asset which is the customer list. These other lenders often attempt to encumber the personal assets of agent’s as security.

Our support of brokers/agents allows them to continue to be successful in providing you with expert advice, choice and excellent service.

 

Line of Business Base Commission
Automobile 12.5%
Residential 20%
Farm 20%
Commercial Property / Liability 20%