Stiglitz Warns AIIA: ‘Compensation System Is Under Attack’

“Our compensation system is under attack, it is probably about $2 billion that independent agents put in their pockets due to profit sharing and it is under attack, there is no doubt about it,” Bill Stiglitz, Independent Insurance Agents and Brokers of America president-elect said.

Stiglitz was a keynote speaker at the Alabama Independent Insurance Agents annual conference and exhibit in Destin, Fla. “There is no doubt about it, we have to educate the public about the difference between a profit-sharing agreement and other contingent arrangements.”

Stiglitz advised, “we have to get that word out and are starting to make some inroads on the difference between an independent agent and broker with a lot of press on that, we are trying to push that through and get the word out but it is going to take a lot more advertising to do it. I believe we will get the word out and that agents are not part of that mess that took place in New York.

“Large brokers have given up on PSAs, I think that was premature and stupid, I think there is nothing wrong with an agreement, as long as you follow through with what you are supposed to do, and as long as you’re not bid-rigging, that is despicable and people should be put in jail and they should be fined.”

Stiglitz said that, for the most part, agents worked hard for their companies and very hard for insurers and deserve the awards they get.

“We are hoping we will be able to continue to educate and inform the public about the difference between a broker and an agent,” he said. “We also continue to tell them the difference between a profit-sharing agreement and other contingent arrangement. I believe it will be preserved when it comes down to the end.

“But the sales culture of America is under attack,” he continued. “When you have someone like Eliot Spitzer who wants us to divulge what we make, how we make it, and so forth – well then lets have the potato-chip maker do the same thing, the car salesman do the same thing, lets have the guy who sells rubber, steel, or anything do it.

“I can see the steel beam, the steel company says we paid $12.50 on this beam, the distributor made this much, and you have to put it on everything you do,” he said. “Well the sales culture of America is under attack, we have to stop it now and I think independent agents will have to do that.”

He said in October 2004 the Big I got ahead of this issue and put out a disclosure policy from our board that applied to brokers urging them to disclose what they made regarding back-end agreements.

“We were lucky we did that and it was because of the foresight of our staff,” Stiglitz said.

Stiglitz said he does not have a problem with agent disclosures.

“I had one client ask me what I was making on a policy and when I answered that I make 15 percent on a package and maybe 15 percent on auto and perhaps 2 to 12 percent on workers’ comp, they say “Is that all?” Stiglitz said. “Most of them think we are getting 90 percent commissions, like the life insurance guys and that’s just not true. They are often amazed at how little we make. So it’s not an issue with independent agents.”

Stiglitz said the Terrorism Risk Insurance Act is in trouble, with not much going on in Congress to get it renewed, it’s not happening.

“As most of you know policies are coming in and terrorism is excluded, period, that’s it,” he explained. “It might not affect the hard line as much, but certainly once we get down to the end of the year and it does expire as of 12/31 we are hoping that Congress will act.

“You are going to see the banking community and certain developers and people who live in high contact areas are going to want this coverage in place,” he said. “It may move then, right now there isn’t a lot of activity and we are not getting any action out of the White House on it either.”

Topics Agencies Talent