An association-sponsored insurance program can provide multiple sources of revenue for a not-for-profit association when the terms are properly negotiated. Common insurance program revenues can include administration service allowances, marketing allowances and contingent profit commissions.
In all instances, proper agreements must be in place and the funds must flow through licensed intermediaries and/or program managers. We are here to help put it all in place!
Administration Service Allowance (ASA)
Insurers recognize that without the strong support of the association, a program will not be successful. An allowance is paid to the association for their efforts in promoting the program to their members and to cover the costs associated with time and resources invested by association employees. For instance, email blasts, mail inserts, social media posts or hosting a table at the AGM.
ASAs are generally calculated as a percentage of the gross written premium (GWP) and issued on a quarterly basis. The value of the ASA is dependent on the line of insurance being written. While remuneration may vary, generally speaking, the ASA falls within one to three per cent of the GWP.
To put that into perspective, if a member purchases their home and automobile insurance through the association’s sponsored program, and their combined annual premium for the house and cars is $3,500, the association will earn $35. Multiply that by thousands of members and it starts to add up quickly.
Associations are in constant communication with their membership, either as a source of industry news, educational opportunities, community gatherings or other pertinent member support. Insurers recognize that every time there is communication between the association and the members, there is a prime opportunity to promote the program. Experienced group insurance carriers will provide an annual marketing allowance to the association in return for continued marketing support. Marketing allowances will be largely predicated by the size of the membership.
Contingent Profit Commission
An association has the potential to share in the underwriting profit with an insurance carrier. Sharing the profitability of underwriting results is known as CPC. Simply put, a CPC is calculated annually using premiums paid, less claims/reserves and policy expenses incurred over the term of the policy. The association has the ability to earn additional revenues up to 30 per cent of the underwriting profit.