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:
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 |
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% |
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.
