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June 11, 2006 at 04:00 PM
Commissions paid on direct business written by insurers increased by 7% in 2005 over 2004 for the top 50 companies as measured by a total of all lines of business.
Total commissions incurred on direct business climbed to $23.8 billion in 2005, up from $22.3 billion in 2004, according to data generated by National Association of Insurance Commissioners (NAIC) Annual Statement Database, via Highline Data L.L.C.
For those top 50 companies, commissions paid on ordinary life business rose 13% to $7.8 billion in 2005, up from $6.9 billion in 2004.
For those same companies, commissions incurred on ordinary annuity business grew 2% to $8.7 billion in 2005 compared with $8.5 billion in 2004.
An examination of commissions incurred as measured by first-year business and renewal business did not suggest that one was more likely to be the driver of the increases than the other. In both categories, there was an 11% increase in commissions paid in 2005 over 2004. For first-year commissions, the total increased to $11.2 billion in 2005 compared with $10.1 billion in 2004. For renewal business, the increase was on a smaller base, growing to $7.9 billion in 2005 compared with $7.1 billion in 2004.
Companies in the top 50 say that for the most part, the increase in commissions was due to an increase in premiums.
Such was the case at American Skandia, a unit of Prudential Financial, Newark, N.J., according to spokesperson Laurita Warner. The increase at American Skandia was due to higher sales of annuities, and in particular, annuities with a lifetime living benefit feature, she says. There was no change to the commission structure, Warner confirms.
American Skandia’s total commissions incurred grew by $90.1 million in 2005 over 2004, in part driven by a $28.3 million increase in annuity commissions.
