And the beat goes on…
Posted by ltoops@sbmedia.com in CSRs, contingent commissions, tags: brokers, contingent commissions, New York, New York state regulatory issues, transparency
Eliot Spitzer’s star has risen and set, but his legacy lives on, at least when it comes to the issue of contingent commissions in the insurance industry.
This week, New York Insurance Superintendent Eric Dinallo and AG Andrew Cuomo started hearings in Buffalo on broker compensation, with two more hearings scheduled for later this month in Albany and Manhattan.
First out of the box to testify was Willis CEO Don Bailey, who stated that contingent commissions should be gradually phased out, with full transparency mandated for all insurance brokers.
Back in the day, agents and brokers relied on contingent commissions as a way to bolster revenue losses after carriers cut regular commissions because of inflation. Over the years, though, contingent commissions have developed an unsavory reputation because of the unfortunate misconduct of the sneaky and the greedy.
Insurers have defended the practice, saying that everyone in any form of sales is entitled to some form of commissions, and that the practice is ethical as long as the buyer is informed of the arrangement and that transparency is maintained. In a lot of cases, compliance involved a lot of voluminous paperwork and red tape, for both the carrier and the producer.
The question remains, what does all this mean to the actual insurance customer? Some say that insureds aren’t aware of the arrangement or if they are, really don’t care all that much, as long as they get the coverage they need at a fair and competitive price.
I’d like to throw the question out to AAB readers: What’s been your experience with coaching your customers about the contingent commission issue — and do they care? And how much of a hit will your agency revenues take if they’re phased out entirely?
Please feel free to share your thoughts!
Entries (RSS)
I believe too much is being made over contingent fees. They are a wonderful bonus arrangement for all agents. The stopping of illegal manipullation of quoting to steer business to where the broker got the most dollars should be stopped. But most agents don’t do that. They put business where they have the most competitive rates in order to be able to sell their customers, because if they didn’t they wouodn’t be selling many customers. They also of course give the customer the coverage that protects them best. They don’t try and manipulate them into one company or another. Therefore we as agents deserve to receive a bonus based on excellent performance for our company. Thanks for allowing me to voice my opinion. Sincerely, Dave Mangold
I think people forget that insurers, agents and brokers are in the business to make money. If structured properly, contingent commissions are meant to reward good underwriting and develop a sense of responsibility with regards to risks booked. However, I can see where this could be abused in some instances. Maybe instead of politicians determining how to run the insurance business, this regulation should be done by insurance experts. We have already seen the results of politicians regulation of the health care industry. That worked, NOT!
[...] one of my first blog posts at “Agent for Change,” I threw out the question of whether contingent commissions should [...]