Posted On: June 18, 2007, 5:30 pm CDT

Posted By: Beaumont

The issue arises when a broker says "look, if you pay me broker fees, I will represent your interests in negotiating premiums." and then goes to the insurance company and says, "for acting in the insurance company's interests, I should receive some compensation."

Insurance companies and the insureds have interests that are in conflict. Any party claiming that they can serve the interests of both, and that is being compensated by both, is engaged in a conflict of interest. The analogy is not a retail salesperson getting a bonus; he works only for his employer. The proper analogy is an attorney that is being paid to defend a client, but is also taking money from opposing counsel.

Just to be clear, I am talking about brokers, NOT agents. They are different things as RIMS acknowledged.

Why is this such a contentious topic? Conflict of interest is a very common and easily accessible concept. As a risk manager, the arguments by brokers for contingent commissions are clear evidence that the interests of the client are not being served. It is damaging to the brokerage profession's reputation and this really should be considered more carefully.