Broker Compensation and Financing

Last Revised:
October 15, 2009

Broker Compensation and Financing

Our Relationships with Insurance Brokers and Agents Compensation explained:

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

Mennonite Mutual Fire Insurance products are available from insurance brokers and captive agents. Consumers are generally aware of the difference between buying through an insurance broker who represents several companies, and purchasing through a captive agent who represents only one company. We also believe that consumers get the best deal in terms of coverage and price—and the most satisfactory experience over the long term—when an insurance broker or agent is advising them.

Our broker and captive agent agreements require that your broker or agent and Mennonite Mutual Fire Insurance exercise the utmost diligence, honesty and good faith in performing their duties, in properly and promptly servicing policies, and in our communications and dealings with policyholders.

We compensate our brokers and agents in two ways: Firstly, we pay them 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 bonus commission program 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. Contingent commission bonus rewards those brokers and agents who understand our market expertise and whose insurance portfolio is made up of the kind of business we seek to write.

Neither Mennonite Mutual Fire Insurance nor the broker or 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.

Mennonite Mutual Fire Insurance’s bonus commission is payable after the end of a year and it is based on the profitability of the broker’s or agent’s total portfolio of business averaged over three years. The additional bonus paid to our brokers or agents ranges from 7% to 5% of the commission earned in the applicable year depending on the loss ratio of the broker or agent.

Mennonite Mutual Fire Insurance’s priorities are to meet obligations to our policyholders 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 enabling us to meet our commitment to our policyholders. Insuring cars, homes and businesses that we price accurately, is fundamental to meeting these commitments.

We do not provide loans of support to any brokers or agents.

For Mennonite Mutual Fire Insurance building the relationship with a broker or agent is a key to providing timely, efficient service to our policyholders.

Our technical and risk management support of brokers and agents allows them to continue to be successful in providing you with expert advice and excellent service.

Line of Business	Base Commission	Estimated percentage of 2004 Total Written Premium
Automobile	20%	2.6%
Commercial	20%	21.4%
Property (includes home-owners, tenant, and condominiums)	20%	23.0%
General Farm	20%	46.1%
Special Risk, and Agri-business	15%	6.9%

Broker/Agent Commission Bonus Plan

An additional bonus commission is paid to our broker or agent under predetermined minimum volume of written premium when their loss ratio is 50% or less based on earned premiums and losses for the last three years.

Bonus commissions are awarded as follows:

3-year loss ratio under 30% - bonus of 7% of commission earned
3-year loss ratio of 30-39% - bonus of 6% of commission earned
3-year loss ratio of 40-50% - bonus of 5% of commission earned

Line of Business