As an independent consultant, (I spent 20+ years witn a national brokerage house previously-not one of the top ten)I want my clients to know what they’re paying you-their broker. Any broker not willing to fully disclose their commission on an account, wouldn’t get my approval for the client.
Cheers to RNR_Risk, he wins the business on his integrity!
When is enough, enough! Banks charge undisclosed fees by the millions transactionally (just look at your ATM receipts – who is getting that surcharge and on what basis is it being charged?) and do we see what their interest rates are on their daily float?; attorney’s charge astronomical fees without any regulation; gov’t. both state and federal exise taxes and fees to consumers without any accountability (ever!) and now – insurance agents need to offer this – why? Let the attorney’s start out first and disclose what they have been stealing (sorry, I meant billing!); You don’t see Spitzer jumping up and down on that one do you! This is just what the insurance business needs – another form to complete and file….unbelievable!
Since when do we need government to write more laws when a few have been found to be breaking the current laws. The proper response to this whole mess is not any new legislation, but enforcement of current legislation. Since we a have a full time legislative body, they need to justify their existence by continually adding new laws. Please Mr. Spitzer file charges, and do not “settle” these “crimes”!!!!
How can anyone argue that our clients are not entitled to know how we’re being compensated? You imply that others are somehow cheating/gouging the public so then its OK for us to do it. Attorneys and other professionals disclose their hourly billing rate in advance.
If we work for insurance buyers – if that’s who we’re obligated to in a fiduciary sense – then (1) they should know exactly how much we’re being paid and (2) THEY should pay it – not an insurance company.
Anything else is a conflict of interest. Insurance brokers will never be considered “professionals” until they address this issue.
I really object to these regulations. People forget that we are mainly salespeople. We could go through 2,3,4 or even 5 people or more before we get a sale.The public will not understand our business model, nor our costs. 75% percent of the work we do is before we get an orders, and many cases we have to wait 30 to 90 days before we get our money. Now we are faced with a client objecting to how much money they perceive we are makeing. If these regs go through, our business model will change, and effect we will become like direct writers offering one quote only, and if the client want additional quotes, they will have to pay for them. Thanks
Our clients did not come to us nor do they care how we are being compensated. Frankly it is none of their business, brokers have a separate situation. Your response does not even come close to my argument. Please read my response again. Think about it. Then respond intelligently, or do you just want to try and feel important!
I don’t think that transparency is a concern for anyone conducting ethical business. How many sane consumers of insurance, which practically all of us are, would not think that our agent is being compensated? Further, how many agents would defraud and conceal what they are being compensated from their clients? The answer to both questions is some fraction approaching zero. The general concern is not that the public will suddenly discover that we are compensated by these transactions, but that we will not be able to comply with the NAIC’s proposed regulations, which if you have read the bill draft, are extremely onerous and could radically change the nature of our business.
PICTURE THIS, YOU JUST SPENT A HALF AN HOUR PREPARING AN AUTO QUOTE FOR AN INSURED WITH A PREMIUM OF $3000 DOLLARS (I’M IN NY) NOW YOU NEED TO TELL THEM THAT YOU WILL BE EARNING APPRO. $450 COMMISSION. HERE’S WHAT I SEE HAPPENING. THE CLIENT IS GOING TO THINK THAT HE CAN BARGAIN YOU DOWN TO WHAT HE FEELS IS A MORE ACCEPTABLE COMMISSION, WHICH CAN’T HAPPEN. HE’LL THAN SHOP THAT NUMBER UNTIL SOMEONE LIES TO HIM OR DECIDES THAT HE WILL REBATE THAT CLIENT. MARK MY WORDS, REBATING WILL BE THE NEXT ISSUE THEY’LL HAVE TO DEAL WITH.
That is why we don’t need any more changes in the existing laws. Who or whom is writing these new laws? Legislaters(lawyers) in DC. These new laws will require more lawyers to help independents follow the guidelines and more lawyers to file suits on behalf of insured’s(who are somehow harmed because an insurance agent made a penny and didn’t ‘properly’ disclose how he was compensated).
The response of regulators is over-blown and ridiculous and exactly what I would expect from a govt organization trying to work with such an efficent & entrepenurial group such as insurance agents. The overwhelming majority of us work our “asses” off for our customers and these new regulations will only hurt the insurnace buying public they allegedly are trying to help.
Clearly the vast majority of agents have literally no opportunity to do the illegal and unscrupulous acts Marsh took part in on a regular basis.
My thought is; if we need to identify every penny of compensation an insurance agent makes, explain every technical aspect of insurance law to each BOP client we have (which they will not understand or care about) then I want to know specifically:
How much:
– the dealership made on my car
– the furniture store made on my living room set.
– the gas station makes on a gallon of gas I buy.
-the supermarket makes (by item) on the things I buy there.
– How much the dept stores make on the individual items they sell me.
– how much of my SS and other govt taxes are going to the specific items they said they would go to and when that budget item changes then I want the tax or fee to end and they can tell me the next thing it will go to prior to taxing us.
I WANT TO KNOW how much everyone in the world makes in salary and if someone may get a bonus for doing business with me. I definitely want to know that information up front so I know if I want to buy a good or service formt his person and allow them potential for a bonus.
The new reg’s really SOUND LIKE A VERY EFFICENT SYSTEM THAT WILL MAKE US ALL BETTER IN THE END.
THIS IS AMONG THE DUMBEST SITUATIONS I HAVE EVER SEEN ….LETS GET REAL AND ADDRESS THE REAL ISSUES AND THE REAL PEOPLE WHO ARE VIOLATING THE TRUST OF THEIR CLIENTS ON A REGULAR BASIS!!!
Thank you sooo much for staying on point rather than attacking on supposed moral issues of whether someone has a right to know how much and how I make income. Fight the real battle against the attackers of freedom and privacy who or whom reside in congress. Again all that has happened is a few, of the many, have broken existing laws, so punish them not me or the many other agents who follow the law. All those who think this is about transparency are, well, ignorant. This is about giving lawyers more freedom to line their pockets at the expense of independent agents and brokers.
Michael I get the problem, I understand the wrong-doing that has been done ….but try and take some time and ask yourself if the solutions suggested really make sense given the folks you know or have come into contact in this business.
I have been an underwriter at major cariers and a broker since 1994. I simply do not know anyone who participated in this scheme or more importantly would participate in a similar scheme that would hurt their clients in such a manner.
The problem is you are dealing with theoretical morality where the offense is only possible by an agency the size of Marsh ….. we are considering changing the world to fix the offense of how many possible perpetrators????
I believe the solution is to press charges on the people who have violated existing laws and prosecute ‘them’ fully. We do not need any changes to prevent people from breaking laws. If they will break existing law they will also break any new laws. But who will get punished by any new law, those who already follow the existing law.
I suspect part of the disconnect here is that a lot of insurance brokers/agents view insurance as a commodity. Glenn illustrates this by listing a set of commodities where we often don’t know the retailer’s margin (furniture, cars, groceries, etc.). If insurance truly is a commodity, then the driving factor in insurance transactions becomes marketing and salesmanship. This seems to be the view of most of the respondents here. In my view, to the extent that insurance contracts truly are commodities, there’s no need whatsoever for an indempendent sales force. Commodities are best bought/sold in efficient auctions. In this case, you won’t have to explain all those onerous “technical insurance details” to your BOP clients.
Another view is that insurance is a complex financial instrument – not a commodity. In this case, buyers do NOT need sales people – they need highly competent and honest technical/financial/risk advice. This advice has or can have a major impact on asset/liability valuation and cost of capital. Consumers are then buying a service, not a commodity and they have every right to know in advance what the service provider is charging or being paid and they have the right for all potential conflicts of interest to be disclosed.
I supposed that ultimately (soon?), available insurance contracts will fall more and more to one limiting case or the other – i.e. true commodity or highly customized financial instrument. And the two cases will likely be transacted in completely different ways.
My grandfather and father both worked most of their adult lives in the insurance business. But the method of doing business that worked for them will probably not continue to work in the future.
RNR – hey some insurance really does lend itself more to commodity vs a unuique financial instrument …there is nothing wrong with that. Is a personal auto policy essentially the same wheather or not State Farm, CHUBB, or Nationwide provides the coverage??
We sell no personal lines here, but do represent some relatively small and relatively large clients. All are commercial but there are differences in what I would explain to some vs others.
In all cases, I would not knowingly provide a product that was not the best possible fit for the client and would never (an never be able to) get carriers to provide fake quotes, provide lucrative placement agreements …AND THEN TAKE PROFIT SHARING.
BUT I definitely would work hard to make the right placement for each client, help them with risk management all year, and in the end if they (along with the rest of our book) are profitable I WILL GLADLY AND WITH PRIDE TAKE A BONUS FOR HELPING EVERYONE WIN!
So your response to a few lawbreakers is to redesign the entire insurance industry. I know let’s also through out the constitution and start over. Hey and let’s dissolve the Union of our 50 states. You can then be in charge and redesign everything according to your whims. I think I have a better idea, charge the lawbreakers with their actual crimes. Then we won’t have to go through all this mess. I could not imagine what would of become the original colonies if lawyers created our government. On second thought I can, just look around. Lawsuits for using lawnmowers as hedge trimmers. People slipping on ice in the middle of winter, imagine that. Its time the insurance industry and the rest of the country wake up get statesmen back in office instead of politicians(lawyers).
The thing I find amazing is that the companies, for whom Mr Sptizer has started his crusade, usually have a well-paid risk manager on board. In addition, a couple of well-paid comptrollers, and CEOs. Aren’t those folks supposed to be smart enough to make a decision that what they are paying for their insurance is fair?
Mine is a small retain agency, split about 70/30 commercial/personal. I would venture to guess that most of my clients realize I must get paid for serving their insurance needs, whether as broker or agent. They make the decision if the pricing is fair. In the glorious Empire State (NY), our Insurance Dept. mandates the completions of specific forms when placing in the E&S markets. One of which states the total cost of the insurance. It does not state the commissions involved, but the amount of real dollars the insured is spending.
I have told clients what I am paid at times. It depends on the circumstance. Essentially, I tell them I cannot work for free. Even the most unsophisticated buyer realizes that.
In my opinion, this whole magilla was just the impetus for someone’s run for Governor.
Very interesting exchange of opinions, folks. We in Canada are also wrestling with this disclosure issue. Generally we have agreement through our national Brokers Association to post certain disclosures on our websites, and print an enclosure to send out with renewals which clarifies how we get paid. Most of us think this is an issue which the majority of our customers could care less about, as long as they are getting their insurance at a cost which seems reasonable. However, if it gets the legislators settled down so they let the industry work without further interference, it is worthwhile.
Many comments miss the point. Anyone’s compensation is not the issue, the issue is does the method of compensation tend to cause one to place business with a certain carrier for only some sort of “perk” compensation. Anyone who has worked in the Agency business has seen Agents purposly guiding business to a certain carrier to “protect his contingency”. That may not be in the clients best interest.
There is nothing wrong with mazimizing your income with a carrier. But, when a broker makes other carriers send in fake proposals, where is the problem? The broker has committed fraud and so has the carrier and when this activity is discovered it needs to be dealt with severely. It is against the law to steal and yet people steal, it is against the law to murder, yet people murder. If everytime a murder or theft is committed we have to write a new law, is the problem solved? NO! People committ crimes daily, we do not need to change existing law just enforce and punish the existing law and law breakers. Mr Spitzer, a lawyer, and the media are all responding inappropriately. Mr. Spitzer wants to make deals. The media wants congress to act. Why not put the criminals in jail and fine the companies by the amount plus interest for false bidding. Take the money from the fines and give it back to the parties that were harmed. This is kind of like insurance- restore the insured back to the condition prior to the insured event happening. Isn’t this much simpler than reinventing the insurance and broker business and getting all 50 state legislatures busy, I think so!!!!!!
As an independent consultant, (I spent 20+ years witn a national brokerage house previously-not one of the top ten)I want my clients to know what they’re paying you-their broker. Any broker not willing to fully disclose their commission on an account, wouldn’t get my approval for the client.
Cheers to RNR_Risk, he wins the business on his integrity!
When is enough, enough! Banks charge undisclosed fees by the millions transactionally (just look at your ATM receipts – who is getting that surcharge and on what basis is it being charged?) and do we see what their interest rates are on their daily float?; attorney’s charge astronomical fees without any regulation; gov’t. both state and federal exise taxes and fees to consumers without any accountability (ever!) and now – insurance agents need to offer this – why? Let the attorney’s start out first and disclose what they have been stealing (sorry, I meant billing!); You don’t see Spitzer jumping up and down on that one do you! This is just what the insurance business needs – another form to complete and file….unbelievable!
Since when do we need government to write more laws when a few have been found to be breaking the current laws. The proper response to this whole mess is not any new legislation, but enforcement of current legislation. Since we a have a full time legislative body, they need to justify their existence by continually adding new laws. Please Mr. Spitzer file charges, and do not “settle” these “crimes”!!!!
How can anyone argue that our clients are not entitled to know how we’re being compensated? You imply that others are somehow cheating/gouging the public so then its OK for us to do it. Attorneys and other professionals disclose their hourly billing rate in advance.
If we work for insurance buyers – if that’s who we’re obligated to in a fiduciary sense – then (1) they should know exactly how much we’re being paid and (2) THEY should pay it – not an insurance company.
Anything else is a conflict of interest. Insurance brokers will never be considered “professionals” until they address this issue.
I really object to these regulations. People forget that we are mainly salespeople. We could go through 2,3,4 or even 5 people or more before we get a sale.The public will not understand our business model, nor our costs. 75% percent of the work we do is before we get an orders, and many cases we have to wait 30 to 90 days before we get our money. Now we are faced with a client objecting to how much money they perceive we are makeing. If these regs go through, our business model will change, and effect we will become like direct writers offering one quote only, and if the client want additional quotes, they will have to pay for them. Thanks
Our clients did not come to us nor do they care how we are being compensated. Frankly it is none of their business, brokers have a separate situation. Your response does not even come close to my argument. Please read my response again. Think about it. Then respond intelligently, or do you just want to try and feel important!
I don’t think that transparency is a concern for anyone conducting ethical business. How many sane consumers of insurance, which practically all of us are, would not think that our agent is being compensated? Further, how many agents would defraud and conceal what they are being compensated from their clients? The answer to both questions is some fraction approaching zero. The general concern is not that the public will suddenly discover that we are compensated by these transactions, but that we will not be able to comply with the NAIC’s proposed regulations, which if you have read the bill draft, are extremely onerous and could radically change the nature of our business.
PICTURE THIS, YOU JUST SPENT A HALF AN HOUR PREPARING AN AUTO QUOTE FOR AN INSURED WITH A PREMIUM OF $3000 DOLLARS (I’M IN NY) NOW YOU NEED TO TELL THEM THAT YOU WILL BE EARNING APPRO. $450 COMMISSION. HERE’S WHAT I SEE HAPPENING. THE CLIENT IS GOING TO THINK THAT HE CAN BARGAIN YOU DOWN TO WHAT HE FEELS IS A MORE ACCEPTABLE COMMISSION, WHICH CAN’T HAPPEN. HE’LL THAN SHOP THAT NUMBER UNTIL SOMEONE LIES TO HIM OR DECIDES THAT HE WILL REBATE THAT CLIENT. MARK MY WORDS, REBATING WILL BE THE NEXT ISSUE THEY’LL HAVE TO DEAL WITH.
That is why we don’t need any more changes in the existing laws. Who or whom is writing these new laws? Legislaters(lawyers) in DC. These new laws will require more lawyers to help independents follow the guidelines and more lawyers to file suits on behalf of insured’s(who are somehow harmed because an insurance agent made a penny and didn’t ‘properly’ disclose how he was compensated).
Read AND understand! I clearly said brokers have a different relationship. Do I need to hold your hand while you read!
The response of regulators is over-blown and ridiculous and exactly what I would expect from a govt organization trying to work with such an efficent & entrepenurial group such as insurance agents. The overwhelming majority of us work our “asses” off for our customers and these new regulations will only hurt the insurnace buying public they allegedly are trying to help.
Clearly the vast majority of agents have literally no opportunity to do the illegal and unscrupulous acts Marsh took part in on a regular basis.
My thought is; if we need to identify every penny of compensation an insurance agent makes, explain every technical aspect of insurance law to each BOP client we have (which they will not understand or care about) then I want to know specifically:
How much:
– the dealership made on my car
– the furniture store made on my living room set.
– the gas station makes on a gallon of gas I buy.
-the supermarket makes (by item) on the things I buy there.
– How much the dept stores make on the individual items they sell me.
– how much of my SS and other govt taxes are going to the specific items they said they would go to and when that budget item changes then I want the tax or fee to end and they can tell me the next thing it will go to prior to taxing us.
I WANT TO KNOW how much everyone in the world makes in salary and if someone may get a bonus for doing business with me. I definitely want to know that information up front so I know if I want to buy a good or service formt his person and allow them potential for a bonus.
The new reg’s really SOUND LIKE A VERY EFFICENT SYSTEM THAT WILL MAKE US ALL BETTER IN THE END.
THIS IS AMONG THE DUMBEST SITUATIONS I HAVE EVER SEEN ….LETS GET REAL AND ADDRESS THE REAL ISSUES AND THE REAL PEOPLE WHO ARE VIOLATING THE TRUST OF THEIR CLIENTS ON A REGULAR BASIS!!!
GH
Thank you sooo much for staying on point rather than attacking on supposed moral issues of whether someone has a right to know how much and how I make income. Fight the real battle against the attackers of freedom and privacy who or whom reside in congress. Again all that has happened is a few, of the many, have broken existing laws, so punish them not me or the many other agents who follow the law. All those who think this is about transparency are, well, ignorant. This is about giving lawyers more freedom to line their pockets at the expense of independent agents and brokers.
Michael and Glenn,
I won’t waste any more time on views such as yours-talk about not “getting it”.
Michael I get the problem, I understand the wrong-doing that has been done ….but try and take some time and ask yourself if the solutions suggested really make sense given the folks you know or have come into contact in this business.
I have been an underwriter at major cariers and a broker since 1994. I simply do not know anyone who participated in this scheme or more importantly would participate in a similar scheme that would hurt their clients in such a manner.
The problem is you are dealing with theoretical morality where the offense is only possible by an agency the size of Marsh ….. we are considering changing the world to fix the offense of how many possible perpetrators????
Sorry we wasted your time.
GH
I believe the solution is to press charges on the people who have violated existing laws and prosecute ‘them’ fully. We do not need any changes to prevent people from breaking laws. If they will break existing law they will also break any new laws. But who will get punished by any new law, those who already follow the existing law.
I suspect part of the disconnect here is that a lot of insurance brokers/agents view insurance as a commodity. Glenn illustrates this by listing a set of commodities where we often don’t know the retailer’s margin (furniture, cars, groceries, etc.). If insurance truly is a commodity, then the driving factor in insurance transactions becomes marketing and salesmanship. This seems to be the view of most of the respondents here. In my view, to the extent that insurance contracts truly are commodities, there’s no need whatsoever for an indempendent sales force. Commodities are best bought/sold in efficient auctions. In this case, you won’t have to explain all those onerous “technical insurance details” to your BOP clients.
Another view is that insurance is a complex financial instrument – not a commodity. In this case, buyers do NOT need sales people – they need highly competent and honest technical/financial/risk advice. This advice has or can have a major impact on asset/liability valuation and cost of capital. Consumers are then buying a service, not a commodity and they have every right to know in advance what the service provider is charging or being paid and they have the right for all potential conflicts of interest to be disclosed.
I supposed that ultimately (soon?), available insurance contracts will fall more and more to one limiting case or the other – i.e. true commodity or highly customized financial instrument. And the two cases will likely be transacted in completely different ways.
My grandfather and father both worked most of their adult lives in the insurance business. But the method of doing business that worked for them will probably not continue to work in the future.
Michael is exactly right.
RNR – hey some insurance really does lend itself more to commodity vs a unuique financial instrument …there is nothing wrong with that. Is a personal auto policy essentially the same wheather or not State Farm, CHUBB, or Nationwide provides the coverage??
We sell no personal lines here, but do represent some relatively small and relatively large clients. All are commercial but there are differences in what I would explain to some vs others.
In all cases, I would not knowingly provide a product that was not the best possible fit for the client and would never (an never be able to) get carriers to provide fake quotes, provide lucrative placement agreements …AND THEN TAKE PROFIT SHARING.
BUT I definitely would work hard to make the right placement for each client, help them with risk management all year, and in the end if they (along with the rest of our book) are profitable I WILL GLADLY AND WITH PRIDE TAKE A BONUS FOR HELPING EVERYONE WIN!
I think I get it.
GH
Glenn:
You are absolutely right that some insurance is/should be commoditized.
You also sound like a good guy. Seriously. Best of luck to you.
Bob
So your response to a few lawbreakers is to redesign the entire insurance industry. I know let’s also through out the constitution and start over. Hey and let’s dissolve the Union of our 50 states. You can then be in charge and redesign everything according to your whims. I think I have a better idea, charge the lawbreakers with their actual crimes. Then we won’t have to go through all this mess. I could not imagine what would of become the original colonies if lawyers created our government. On second thought I can, just look around. Lawsuits for using lawnmowers as hedge trimmers. People slipping on ice in the middle of winter, imagine that. Its time the insurance industry and the rest of the country wake up get statesmen back in office instead of politicians(lawyers).
The thing I find amazing is that the companies, for whom Mr Sptizer has started his crusade, usually have a well-paid risk manager on board. In addition, a couple of well-paid comptrollers, and CEOs. Aren’t those folks supposed to be smart enough to make a decision that what they are paying for their insurance is fair?
Mine is a small retain agency, split about 70/30 commercial/personal. I would venture to guess that most of my clients realize I must get paid for serving their insurance needs, whether as broker or agent. They make the decision if the pricing is fair. In the glorious Empire State (NY), our Insurance Dept. mandates the completions of specific forms when placing in the E&S markets. One of which states the total cost of the insurance. It does not state the commissions involved, but the amount of real dollars the insured is spending.
I have told clients what I am paid at times. It depends on the circumstance. Essentially, I tell them I cannot work for free. Even the most unsophisticated buyer realizes that.
In my opinion, this whole magilla was just the impetus for someone’s run for Governor.
Very interesting exchange of opinions, folks. We in Canada are also wrestling with this disclosure issue. Generally we have agreement through our national Brokers Association to post certain disclosures on our websites, and print an enclosure to send out with renewals which clarifies how we get paid. Most of us think this is an issue which the majority of our customers could care less about, as long as they are getting their insurance at a cost which seems reasonable. However, if it gets the legislators settled down so they let the industry work without further interference, it is worthwhile.
Many comments miss the point. Anyone’s compensation is not the issue, the issue is does the method of compensation tend to cause one to place business with a certain carrier for only some sort of “perk” compensation. Anyone who has worked in the Agency business has seen Agents purposly guiding business to a certain carrier to “protect his contingency”. That may not be in the clients best interest.
There is nothing wrong with mazimizing your income with a carrier. But, when a broker makes other carriers send in fake proposals, where is the problem? The broker has committed fraud and so has the carrier and when this activity is discovered it needs to be dealt with severely. It is against the law to steal and yet people steal, it is against the law to murder, yet people murder. If everytime a murder or theft is committed we have to write a new law, is the problem solved? NO! People committ crimes daily, we do not need to change existing law just enforce and punish the existing law and law breakers. Mr Spitzer, a lawyer, and the media are all responding inappropriately. Mr. Spitzer wants to make deals. The media wants congress to act. Why not put the criminals in jail and fine the companies by the amount plus interest for false bidding. Take the money from the fines and give it back to the parties that were harmed. This is kind of like insurance- restore the insured back to the condition prior to the insured event happening. Isn’t this much simpler than reinventing the insurance and broker business and getting all 50 state legislatures busy, I think so!!!!!!