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Article | Executive Pay Memo North America

Insights on non-public insurer board practices

By Max Fogle , Robert Hermenze , Shannon Williams and Hamsa Jambulapati | December 19, 2023

Board practices and policies at mutuals and other non-public insurance companies differ in key areas from public company practices.
Executive Compensation|Insurance Consulting and Technology

A new survey from WTW addresses a prior gap in market data about non-public insurance company boards. While the survey contains detailed information on director compensation practices and pay levels, it also provides insights into broader board policies and practices. We expected that nuances in ownership and governance structures at mutual and other non-public insurers would drive differences versus public company practice. This article compares selected results from the survey with S&P 500 public company practices from recent research conducted by WTW

Following are key findings on non-public insurance boards:

  • Total compensation lags behind that of similarly sized public companies, with the lack of equity compensation driving the gap.
  • As at public companies, the boards are composed largely of independent directors, but with a higher prevalence of non-executive chairs of the board.
  • Non-public insurance boards are less likely to have age limits and more likely to have term limits than public boards.
  • Non-public insurance boards are more likely to provide life insurance benefits to directors; some companies require directors to hold a policy as a requirement for board membership (with an intent to align directors’ interest with policyholders).

WTW’s survey includes detailed information on board member retainers and meeting fees, incremental compensation for board leadership and committee compensation. Data cuts are also available by company asset size.

We compared the larger organizations from the survey (assets greater than $10 billion) with S&P 500 companies. Few organizations in our non-public survey are able to offer equity, meaning compensation is generally delivered 100% in cash, whereas most board compensation at public companies is in the form of equity.

Focusing just on board retainers, non-public companies deliver higher median cash retainers than public companies; however, non-public company total compensation falls well short of public companies once we factor in equity retainers.

Non-public insurance boards will want to review the full survey to ensure they have the most size-appropriate sample and benchmark the remaining elements of board compensation.

Item Non-public insurers, >$10B in assets (N=17) S&P 500 companies
Median total compensation mix (cash/equity) 100%/0% 39%/61%
Median board cash retainer ~$135,000 ~$100,000
Median board total retainer ~$135,000 ~$285,000
Composition and leadership

Perhaps surprisingly, we found that non-public boards have more members on average than those at S&P 500 companies. Industry governance norms could partially explain this difference, as non-public boards almost always feature a fourth permanent committee (typically investment or finance) in addition to the standard audit, compensation and governance committees. As at public companies, the vast majority of directors at non-public companies are considered independent.

However, while executive chairs lead a slight majority of public company boards, over three-quarters of non-public insurers have a non-executive chair. Because of this, the prevalence of lead independent directors is lower at non-public insurers.

Finally, our survey suggests that female board representation on boards in both samples is similar, with significant gaps to full parity.

Item Non-public insurers (N=32) S&P 500 companies
Average number of board members 12 10
Non-executive chair of board prevalence 77% 44%
Lead independent director prevalence 37% 63%
% of female board members 34% 35%
Limits and requirements

Debate continues on the merit of various age and term limit policies for boards. Our survey finds that non-public insurers are less likely to have age limits and more likely to have term limits than public companies, but age limit policies are still more prevalent than term limits at non-publics. The typical limits set forth under these policies are also similar across both types of companies.

One other interesting minority practice we observe at non-public insurers (21% of survey participants) is a requirement to be an insurance policyholder of the organization, intended to align board member interests to those of policyholders. This objective can be more convincingly accomplished through the use of equity at public companies, which is not available to mutual insurers.

Item Non-public insurers (N=32) S&P 500 companies
Age limit prevalence 48% 65%
Average age limit 74 74
Term limit prevalence 21% 9%
Term limit — average number of years 14 14

As at public companies, non-public insurers offer few benefits and perks to board members. One exception is that a majority of mutual life insurance companies cover life insurance premiums for directors. This practice could in part be explained by the previously mentioned desire to align interests with policyholders; it also could reflect that life insurance could be a cost-effective reward for these organizations given their businesses.

Item Non-public insurers (N=32) S&P 500 companies
Life insurance premium coverage 67% < 5%
Charitable gifts — matching 27% 33%
Travel insurance 20% 9%
Other benefits and perks < 10% < 10%

Non-public insurance boards should regularly review policies and practices to better understand potential gaps to market and emerging trends. Given inherent differences between non-public and public company practices, and nuances specific to the insurance industry, we believe this new survey will be an invaluable resource for market pay information and other insights.

Additionally, we have observed increased interest in understanding board effectiveness at organizations of all types. WTW has developed tools and collaborative processes for assessing and enhancing board effectiveness, which we've recently employed in the non-public sector of the insurance industry.

If your organization is interested in learning more about the survey or WTW’s approach to board effectiveness, please reach out to the authors or your WTW contact.


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