Very informative article until the last paragraph pertaining to the brokers providing a program that best fits the needs of the insured without focusing on price.
The problem is in the current market it is all about price and only price. It is very difficult to sell a higher quality product when the broker more often than not is only focused on price rather than terms and conditions.
When clients or prospects are focused on price – and only price – it’s difficult to sell a higher-quality product that may cost more. Clients generally don’t care about quality, and agents are put into the situation – sell low or your competitor will.
Glad to hear the case went this way. IMO an agent should offer a competitive price with the highest commission they can negotiate. I don’t see where it is any business of the insured what the agent makes. You can bet the insured doesn’t break it down for his customers like that. If this case had went the other way it would sort of be like the government dictating what health insurers can make, pure socialism/communism, oh but wait, they did do that.
If you sell your house do you care what your realtor makes? It does matter long term because commissions are part of the price the client pays. You can argue it does not matter but long term it does affect the price. As an aside, it should be SOP on large premium accounts (over $250K for example) that premiums should be quoted net and let the brokers negiogiate their fee (ie. sell their value).
There is no mention of coverage – are we to assume that absolutely equivalent coverages are available from any and all carriers that quote the account to an agent? In today’s marketplace, finding all carriers quoting on identical policy terms, conditions, exclusions etc. is highly unlikely and improbable. Absolutely unfair to set any standard for agents that requires them to offer the lowest quote or to hold an agent responsible for any consequences. Good decision, but watch out for what may happen next.
Absolutely spot on Expert!! Addtionally, I would add that the “soft” portion of the broker equation is to steer the client away from lowball, single shot deals that will end up costing more money ultimately or for which the services provided are deemed detrimental to the risk management program of the insured.
Where the broker has two identical policies with two financially secure companies, price should be the last issue that determines with which carrier coverage is placed. To ignore the price factor, and allow commissions to dictate, is disingenuine especially in 2012 when most business – small and large – are bottom line conscious.
Our business as brokers is to scour the market for the best option for the client at the best price and then present and explain the options to the insured. Pros and cons. It is then up to the insured to make the informed decision. We should not cherry pick what we believe is the best for the insured, but inform them and let them make the choice. I have had plenty of clients choose a program that cost more but was much better in terms, conditions, and service. It takes more time to do it well, but that is our job.
Come on expert (and Dave in Kentucky)!! Of course clients should know what their AGENT acting on their behalf is paid. Whether that be insurance, a realtor or other service provider. To take a swipe at insureds as you do is dreadful – no wonder you do so annonymously!!! Mandatory disclosure continues to be a live topic here in the UK. As to offering products it seems to me that Libby is pretty spot on. When I worked as a broker in D&O cover in the London market we provided DETAILED ANALYSIS of the whole package – price, insurer ratings, claims paying repuation, conditions and exclusions and other relevant policy matters – yet I STILL see brokers sending out policies saying “please check this etc etc etc…” If I had a broker treating me so lazily I would deal direct – insurance brokers are SUPPOSED to provide advice, not act as a postal service. Ignore this at your peril – the cases being won by insureds against brokers are stacking up!!!
As you say Michael, Marsh have a short memory re Spitzer!
Douglas – I think you, and many others, are MISREADING THE QUESTION – which says nothing about commissions or disclosures. So why are you raising a second issue and question? The question addresses (purportedly)the same limits and coverages and a difference in only the premium charged by a carrier – which I contested by stating that it is highly unlikely that in today’s market and individual company coverasge-broadening endorsements so it is probable that it will never come to a question of ONLY the premium.
The article states M&M was placing GL coverage for Emerson. Marsh always works on a fee basis, so their only way to make additional compensation was through contingencies. Emerson claims M&M placed coverage through carriers that paid contingencies rather than through carriers that offered coverage a lower premium. That was steering of business and they should be ashamed of themselves. It breaches our fiduciary duty as brokers, which is to the client. I do not approve of central marketing, as it breeds corruption.
Sorry “Expert” I don’t think insults take us forward. I have an MBA, LLM and ACII – you do not need to worry about my intellect, experience and/or ability to understand the question.
And I am very fond of (some aspects) of the USA – like punitive damages against negligent insurance brokers!!!
During the 1980’s I had to the privelege and honour to broker US risks in to the London and Bermuda markets and travel extensively in North America.
I have read the decision in this case and commend it to all commentators herein.
As I said before why are insurance brokers SO afraid of disclosing earnings? And it wasn’t me who introduced this subject but it pertinent to the wider argument. Fact.
Finally if a broker has obtained 10 quotes they should disclose them all with detailed policy analyses – in my opinion! That is if they are capable of doing so and believe me I have seen many who are not.
I won’t vewne bother to confuse you, Edinburgh, with my education, degrees and experience in the industry – which exceed yours – because none of that is relevant, and neither are your purported degrees. I offered no insult, so you must have a thin skin – or are suffering some psychiatric inadequacy problems – don’t start, because these are the types of arguments or disputes I have never lost. The simple issue we should all be addressing is must an agent always sell the cheapest policy? My suggestion was “no”, because that would more often than not deprive the client of better and needed coverages. Agree or disagree with that concept? Stay on the central question, I never drifted off from it.
Sorry “expert” but I think labelling someone as “stupid” is fairly insulting within a professional discussion. Well that is how we conduct ourselves here in the UK, with mutual respect.
As to TWO of the points that are dealt with by the judge in the case ie should a broker always offer the lowest price and should they earn secret commissions the judgement was very state specific.
My view as a former broker and now client is that (and Libby is spot on here) the professional broker in my view SHOULD disclose a range of quotations and analyse (not just post/send) those to the client in terms of cover, insurer rating, claims reputation etc. In the UK we have a regulatory system which helpfully deal with such transactions under an “advised sale” and “treating customers fairly” regime.
The cheapest, or should I more acurately say lower premium, quotation seems to in a commercial setting always be disclosed with any concerns the broker has.
Open disclosure on how much an agent whether in an insurance setting or other agency relationship should always be disclosed, fact. Or what is it that you fear?
August 20, 2012 at 2:50 pm
John Scrader says:
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The whole Elliot Spitzer thing ticked me off. I’m all for disclosure, but where does it end? For that matter, what other industries have to disclose how much they make off each transaction? I think this disclosure issue has now been decided in NY and now Missouri.
I think we, as brokers, need to stop apologizing for what we make. I am not embarassed to let the client know my compensation, because I provide them with a detailed service plan that outlines what they get for their money. With a 98% retention rate, I think most of them recognized the value. Besides, unless I’m on a fee, they aren’t going to get it any cheaper anywhere else. At least I’ll work for the commission/fee!
One other item “Douglas in Edenburg” – do you think your sign-in identifies you? I have used my sign-in for a very long time, and do not do so to “hide” my name. So now we have a scenario where you try to pass judgment on what we should do in the USA (or should I say in the colonies?) when you don’t even understand the question? Do us all a big favor and sign-off, stupid! Your comments are not aimed at the issue because you don’t understand the issue.
We provide full disclosure on our proposals- the only comments I have received from insureds is “that’s all you make on this policy?”. Our duty as Broker is to give our insured CHOICES. That includes allowing them to choose better coverage or company for a higher premium. Marsh and similar organizations are brought into court more often because they are writing large cases and they get greedy and arrogant.
Very informative article until the last paragraph pertaining to the brokers providing a program that best fits the needs of the insured without focusing on price.
The problem is in the current market it is all about price and only price. It is very difficult to sell a higher quality product when the broker more often than not is only focused on price rather than terms and conditions.
When clients or prospects are focused on price – and only price – it’s difficult to sell a higher-quality product that may cost more. Clients generally don’t care about quality, and agents are put into the situation – sell low or your competitor will.
Glad to hear the case went this way. IMO an agent should offer a competitive price with the highest commission they can negotiate. I don’t see where it is any business of the insured what the agent makes. You can bet the insured doesn’t break it down for his customers like that. If this case had went the other way it would sort of be like the government dictating what health insurers can make, pure socialism/communism, oh but wait, they did do that.
If you sell your house do you care what your realtor makes? It does matter long term because commissions are part of the price the client pays. You can argue it does not matter but long term it does affect the price. As an aside, it should be SOP on large premium accounts (over $250K for example) that premiums should be quoted net and let the brokers negiogiate their fee (ie. sell their value).
There is no mention of coverage – are we to assume that absolutely equivalent coverages are available from any and all carriers that quote the account to an agent? In today’s marketplace, finding all carriers quoting on identical policy terms, conditions, exclusions etc. is highly unlikely and improbable. Absolutely unfair to set any standard for agents that requires them to offer the lowest quote or to hold an agent responsible for any consequences. Good decision, but watch out for what may happen next.
Absolutely spot on Expert!! Addtionally, I would add that the “soft” portion of the broker equation is to steer the client away from lowball, single shot deals that will end up costing more money ultimately or for which the services provided are deemed detrimental to the risk management program of the insured.
Apparently the Spitzer suit didn’t teach Marsh a lesson. Disclosure is a part of our business.
Where the broker has two identical policies with two financially secure companies, price should be the last issue that determines with which carrier coverage is placed. To ignore the price factor, and allow commissions to dictate, is disingenuine especially in 2012 when most business – small and large – are bottom line conscious.
Our business as brokers is to scour the market for the best option for the client at the best price and then present and explain the options to the insured. Pros and cons. It is then up to the insured to make the informed decision. We should not cherry pick what we believe is the best for the insured, but inform them and let them make the choice. I have had plenty of clients choose a program that cost more but was much better in terms, conditions, and service. It takes more time to do it well, but that is our job.
Come on expert (and Dave in Kentucky)!! Of course clients should know what their AGENT acting on their behalf is paid. Whether that be insurance, a realtor or other service provider. To take a swipe at insureds as you do is dreadful – no wonder you do so annonymously!!! Mandatory disclosure continues to be a live topic here in the UK. As to offering products it seems to me that Libby is pretty spot on. When I worked as a broker in D&O cover in the London market we provided DETAILED ANALYSIS of the whole package – price, insurer ratings, claims paying repuation, conditions and exclusions and other relevant policy matters – yet I STILL see brokers sending out policies saying “please check this etc etc etc…” If I had a broker treating me so lazily I would deal direct – insurance brokers are SUPPOSED to provide advice, not act as a postal service. Ignore this at your peril – the cases being won by insureds against brokers are stacking up!!!
As you say Michael, Marsh have a short memory re Spitzer!
Douglas – I think you, and many others, are MISREADING THE QUESTION – which says nothing about commissions or disclosures. So why are you raising a second issue and question? The question addresses (purportedly)the same limits and coverages and a difference in only the premium charged by a carrier – which I contested by stating that it is highly unlikely that in today’s market and individual company coverasge-broadening endorsements so it is probable that it will never come to a question of ONLY the premium.
The article states M&M was placing GL coverage for Emerson. Marsh always works on a fee basis, so their only way to make additional compensation was through contingencies. Emerson claims M&M placed coverage through carriers that paid contingencies rather than through carriers that offered coverage a lower premium. That was steering of business and they should be ashamed of themselves. It breaches our fiduciary duty as brokers, which is to the client. I do not approve of central marketing, as it breeds corruption.
Libby is spot on.
Sorry “Expert” I don’t think insults take us forward. I have an MBA, LLM and ACII – you do not need to worry about my intellect, experience and/or ability to understand the question.
And I am very fond of (some aspects) of the USA – like punitive damages against negligent insurance brokers!!!
During the 1980’s I had to the privelege and honour to broker US risks in to the London and Bermuda markets and travel extensively in North America.
I have read the decision in this case and commend it to all commentators herein.
As I said before why are insurance brokers SO afraid of disclosing earnings? And it wasn’t me who introduced this subject but it pertinent to the wider argument. Fact.
Finally if a broker has obtained 10 quotes they should disclose them all with detailed policy analyses – in my opinion! That is if they are capable of doing so and believe me I have seen many who are not.
I won’t vewne bother to confuse you, Edinburgh, with my education, degrees and experience in the industry – which exceed yours – because none of that is relevant, and neither are your purported degrees. I offered no insult, so you must have a thin skin – or are suffering some psychiatric inadequacy problems – don’t start, because these are the types of arguments or disputes I have never lost. The simple issue we should all be addressing is must an agent always sell the cheapest policy? My suggestion was “no”, because that would more often than not deprive the client of better and needed coverages. Agree or disagree with that concept? Stay on the central question, I never drifted off from it.
Sorry “expert” but I think labelling someone as “stupid” is fairly insulting within a professional discussion. Well that is how we conduct ourselves here in the UK, with mutual respect.
As to TWO of the points that are dealt with by the judge in the case ie should a broker always offer the lowest price and should they earn secret commissions the judgement was very state specific.
My view as a former broker and now client is that (and Libby is spot on here) the professional broker in my view SHOULD disclose a range of quotations and analyse (not just post/send) those to the client in terms of cover, insurer rating, claims reputation etc. In the UK we have a regulatory system which helpfully deal with such transactions under an “advised sale” and “treating customers fairly” regime.
The cheapest, or should I more acurately say lower premium, quotation seems to in a commercial setting always be disclosed with any concerns the broker has.
Open disclosure on how much an agent whether in an insurance setting or other agency relationship should always be disclosed, fact. Or what is it that you fear?
The whole Elliot Spitzer thing ticked me off. I’m all for disclosure, but where does it end? For that matter, what other industries have to disclose how much they make off each transaction? I think this disclosure issue has now been decided in NY and now Missouri.
I think we, as brokers, need to stop apologizing for what we make. I am not embarassed to let the client know my compensation, because I provide them with a detailed service plan that outlines what they get for their money. With a 98% retention rate, I think most of them recognized the value. Besides, unless I’m on a fee, they aren’t going to get it any cheaper anywhere else. At least I’ll work for the commission/fee!
One other item “Douglas in Edenburg” – do you think your sign-in identifies you? I have used my sign-in for a very long time, and do not do so to “hide” my name. So now we have a scenario where you try to pass judgment on what we should do in the USA (or should I say in the colonies?) when you don’t even understand the question? Do us all a big favor and sign-off, stupid! Your comments are not aimed at the issue because you don’t understand the issue.
We provide full disclosure on our proposals- the only comments I have received from insureds is “that’s all you make on this policy?”. Our duty as Broker is to give our insured CHOICES. That includes allowing them to choose better coverage or company for a higher premium. Marsh and similar organizations are brought into court more often because they are writing large cases and they get greedy and arrogant.