What\’s unethical about rewarding performance? Every worthwhile company in America does it. Have you ever received a pay raise? How about a bonus for a job well done?
Here\’s a comparison for you. Ever look at two identical products (we\’ll use cell phones), with identical features, prices, and service? How did you choose? Now what if one of them had an incentive like a $50 rebate. Made the choice a little easier, didn\’t it?
Why should insurers be singled out for using an obviously effective marketing technique to steer desirable business onto their books? So long as it is done properly (i.e. no bid rigging or collusion), absolutely nothing! Honest business practices need to be distinguished from criminal manipulation, and that\’s where Spitzer went too far.
Let us come to grip and realize why compensation matters have not changed for the average independant. It has nothing to do with IIABNY, PIA or any other trade organization who are now out there blowing their own horns telling us how great they are and how they saved the day. Simply put, and as a matter of law, there is nothing technically on the books, or otherwise, that prevents or discourages this activity that has been ongoing since before most of the people now active in our industry ever even heard about insurance. Ethics aside for a moment, contingent income arrangements in itself does not constitute an illegal activity and that is the sole reason why Mr. Spitzer did not pursue the matter further.
I was an agent in N.J. for 30 years before retiring to the sunny climes of Florida. I always tried to give good business to my carriers, because that Contigent Commission check about 3 months after close of business that year was sure welcome. No one rigged bids or proposals in my operation. Sometimes we got checks and when we didn\’t, we tried harder the next year. It was legit then and it\’s legit now. Anyone who says otherwise probably is not getting checks because his loss ratio sucks.
The statement that Spitzer uncovered \”grotesque illegal activities\” at some of the nation\’s largest insurance brokers is absolutely untrue and misleading. Spitzer uncovered illegal activities within the Global Broking unit of the world\’s largest broker, Marsh, and within some of the carriers who did business with Marsh. Other brokers were swept up in the frenzy because of the \”potential conflict of interest\” in accepting contingent commissions from markets while representing the client. There is a HUGE difference between that and \”grotesque illegal activities.\”
It sickens me to hear anyone defend contingent commissions and the inherent conflict of interest that results.
If some agent or broker believes that transparency and disclosure is the answer, then the words: \”I am paid by, and therefore represent, SOME insurance companies. As a business person, I am in this business to make money.\” should be placed on their store windows, websites and business cards.
I assume you avoid taking advantage of coupons, rebates, incentives, sales, discounts, bargains, wholesale dealers, employee pricing, and any other marketing tool used by other companies to obtain legitimate, profitable business?
I also assume you\’ve turned down every raise, bonus, or opportunity to earn additional income based on your honest hard work.
Contingent commissions only create a conflict of interest when they are manipulated by the dishonest and criminal. Any agent worth their while as a business person knows that in order to retain their customers, they\’d better be placing them with the proper company with the right rate. Otherwise, they go to Agent B across the street.
Why shouldn\’t an agent reap some benefit outside the standard commission from placing PROFITABLE business with a particular carrier? Any bum can submit junk business for the base fees.
So long as the customer makes an informed decision about the placement based on the best possible combination of price, product, and service, where is the conflict?
the so-called Market Service Agreements, which violated the NY anti trust statues, are what some people are being prosecuted for, but as a matter of fact similar agreements exist and have been approved by some state insurance departments…. a carrier is incentivising it\’s customers to send it more business and offers additional commission based on production increases with no regard to the profitability of that business…so it\’s allowed for some carriers but some people may be going to jail over it??!…as screwed up as the industry is and will remain we should at least have no problem recognizing what is and what isn\’t legitimate compensation
… but in reality it\’s as clear as mud.
Spitzer\’s investigation involved Brokers who represented the client, were paid a fee by that client, and then received a contingent commission from the insurance company for placing the business with them. In my opinion this conduct is unethical and possibly illegal. However, the issue of contingent commissions paid to agents who represent the insurance company, and are paid a base commission by the insurance company, is a whole different matter that is justified, ethical and legal.
Contingent commissions are a relic of the past, when in the glory days of IAs, we placed the business, we billed the policies and we controlled the client. Today we have sophisticated underwriting models that are not suggestive or manipulable and we have direct billed accounts. There was a time when agents were rewarded for \”profitability\”. Today the emphasis is on growth – no matter how profitable your book, you have to grow to get the bones. I say, pay us what we are worth to begin with, and then call it what it is – a sales bonus pure and simple. Get rid of the moving targets, and the formularies that disguise the motivation of the carrier. If they could get away with paying you nothing, they would. (I am getting a bonus from my various carries by the way; I\’d rather have the latitude to put them where they are best served rather than just with a carrier that presents the best opportunity for a bonus.
Yeah, right.
Wrong dude. I worked at Willis and stuff worse than that was going on there and at AON where my friends work. Marsh was the tip of the iceburg.
What\’s unethical about rewarding performance? Every worthwhile company in America does it. Have you ever received a pay raise? How about a bonus for a job well done?
Here\’s a comparison for you. Ever look at two identical products (we\’ll use cell phones), with identical features, prices, and service? How did you choose? Now what if one of them had an incentive like a $50 rebate. Made the choice a little easier, didn\’t it?
Why should insurers be singled out for using an obviously effective marketing technique to steer desirable business onto their books? So long as it is done properly (i.e. no bid rigging or collusion), absolutely nothing! Honest business practices need to be distinguished from criminal manipulation, and that\’s where Spitzer went too far.
Let us come to grip and realize why compensation matters have not changed for the average independant. It has nothing to do with IIABNY, PIA or any other trade organization who are now out there blowing their own horns telling us how great they are and how they saved the day. Simply put, and as a matter of law, there is nothing technically on the books, or otherwise, that prevents or discourages this activity that has been ongoing since before most of the people now active in our industry ever even heard about insurance. Ethics aside for a moment, contingent income arrangements in itself does not constitute an illegal activity and that is the sole reason why Mr. Spitzer did not pursue the matter further.
You are obviously an internet troll. Why else would your posting name be \”Eliot\”.
I was an agent in N.J. for 30 years before retiring to the sunny climes of Florida. I always tried to give good business to my carriers, because that Contigent Commission check about 3 months after close of business that year was sure welcome. No one rigged bids or proposals in my operation. Sometimes we got checks and when we didn\’t, we tried harder the next year. It was legit then and it\’s legit now. Anyone who says otherwise probably is not getting checks because his loss ratio sucks.
The statement that Spitzer uncovered \”grotesque illegal activities\” at some of the nation\’s largest insurance brokers is absolutely untrue and misleading. Spitzer uncovered illegal activities within the Global Broking unit of the world\’s largest broker, Marsh, and within some of the carriers who did business with Marsh. Other brokers were swept up in the frenzy because of the \”potential conflict of interest\” in accepting contingent commissions from markets while representing the client. There is a HUGE difference between that and \”grotesque illegal activities.\”
It sickens me to hear anyone defend contingent commissions and the inherent conflict of interest that results.
If some agent or broker believes that transparency and disclosure is the answer, then the words: \”I am paid by, and therefore represent, SOME insurance companies. As a business person, I am in this business to make money.\” should be placed on their store windows, websites and business cards.
Hey Ken…
I assume you avoid taking advantage of coupons, rebates, incentives, sales, discounts, bargains, wholesale dealers, employee pricing, and any other marketing tool used by other companies to obtain legitimate, profitable business?
I also assume you\’ve turned down every raise, bonus, or opportunity to earn additional income based on your honest hard work.
Contingent commissions only create a conflict of interest when they are manipulated by the dishonest and criminal. Any agent worth their while as a business person knows that in order to retain their customers, they\’d better be placing them with the proper company with the right rate. Otherwise, they go to Agent B across the street.
Why shouldn\’t an agent reap some benefit outside the standard commission from placing PROFITABLE business with a particular carrier? Any bum can submit junk business for the base fees.
So long as the customer makes an informed decision about the placement based on the best possible combination of price, product, and service, where is the conflict?
Ken, do you have any better ideas for a bonus system? Lets hear it!
the so-called Market Service Agreements, which violated the NY anti trust statues, are what some people are being prosecuted for, but as a matter of fact similar agreements exist and have been approved by some state insurance departments…. a carrier is incentivising it\’s customers to send it more business and offers additional commission based on production increases with no regard to the profitability of that business…so it\’s allowed for some carriers but some people may be going to jail over it??!…as screwed up as the industry is and will remain we should at least have no problem recognizing what is and what isn\’t legitimate compensation
… but in reality it\’s as clear as mud.
Spitzer\’s investigation involved Brokers who represented the client, were paid a fee by that client, and then received a contingent commission from the insurance company for placing the business with them. In my opinion this conduct is unethical and possibly illegal. However, the issue of contingent commissions paid to agents who represent the insurance company, and are paid a base commission by the insurance company, is a whole different matter that is justified, ethical and legal.
Contingent commissions are a relic of the past, when in the glory days of IAs, we placed the business, we billed the policies and we controlled the client. Today we have sophisticated underwriting models that are not suggestive or manipulable and we have direct billed accounts. There was a time when agents were rewarded for \”profitability\”. Today the emphasis is on growth – no matter how profitable your book, you have to grow to get the bones. I say, pay us what we are worth to begin with, and then call it what it is – a sales bonus pure and simple. Get rid of the moving targets, and the formularies that disguise the motivation of the carrier. If they could get away with paying you nothing, they would. (I am getting a bonus from my various carries by the way; I\’d rather have the latitude to put them where they are best served rather than just with a carrier that presents the best opportunity for a bonus.