Impact of Spitzer Broker Fraud Charges Felt at Marsh and Beyond
National News • October 18, 2004
New York Attorney General Eliot Spitzer's filing last Thursday of charges against giant insurance broker Marsh for alleged commercial account steering and bid rigging has already had significant ...
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Subject: RE: Spitzers insurance investigation and chargess
Posted On: October 18, 2004, 2:11 pm CDT
Posted By: Mike
Comment:
Be careful of your definitions -
An "agent" works for the insurer and has a fiduciary duty to the insurer. Agents can have any type of comp you want, because effectively they behave like employees of the insurer.
A "broker" on the other hand, does NOT work for the insurer -they are hired by, and therefore have a fiduciary duty to, the policyholder. That's why M&M is in trouble - they violated their fiducary duty as brokers by colluding with the insurer to steer business. The policyholder has a right to expect the broker will put their (the policyholder's) interests FIRST, which is not what M&M did. And they engaged in fraud by presenting fake bids.
The contingent comissions AIG and M&M used work for agents, but it's hard to argue they're a good idea for brokers, because they create a conflict of interest.
Subject: RE: Spitzers insurance investigation and chargess
An "agent" works for the insurer and has a fiduciary duty to the insurer. Agents can have any type of comp you want, because effectively they behave like employees of the insurer.
A "broker" on the other hand, does NOT work for the insurer -they are hired by, and therefore have a fiduciary duty to, the policyholder. That's why M&M is in trouble - they violated their fiducary duty as brokers by colluding with the insurer to steer business. The policyholder has a right to expect the broker will put their (the policyholder's) interests FIRST, which is not what M&M did. And they engaged in fraud by presenting fake bids.
The contingent comissions AIG and M&M used work for agents, but it's hard to argue they're a good idea for brokers, because they create a conflict of interest.