Tom, I won’t belabor the point, and will only post this explanation once. The auto dealer analogy is really not appropriate here. The lawyer analogue seems more apt, in that P&C insurance brokers are actually highly specialized contract attorneys dealing exclusively with insurance contracts. Insurance brokers have a duty to their customers (and in some states are required by law) to disclose their income when they work on a commission basis IF they charge a fee for service.
The Spitzer investigations deal with business is placed in a company for the benefit of the broker, NOT for the benefit of the client, a conflict of interest. In many cases, Spitzer demonstrated that Marsh and others manipulated proposals and bids to ensure contingent commissions for Marsh, where it was not in their clients’ interest to do this.
As a broker who worked for was a larger mid-sized broker that did the same on small to middle market accounts, and I deplored the practice that I was instructed to participate in.
It is prevalent in the industry on varying scales across the P&C brokerage spectrum. If brokers want to be respected professionals in the business community (and not hounded by trial lawyers as if they are dishonest crooks, as some here have suggested) they need to hold themselves to a higher standard of transparency and fair play.
I am a believer in a paradigm shift to merit based compensation in the insurance brokerage area. If a good attorney or risk manager can command a good fee, why not an insurance broker if they provide service of value to the client they represent?
The more able brokers would command a higher fee, the compensation structure would be transparent and the more successful brokers will earn their money based upon their expertise and ability in representing clients in their dealings with insurers.
I am convinced that those screaming loudest about loss of contingent commissions are those who are getting a free ride or are worried about a young, bright kid succeeding in a field that seemed like an easy bet, coasting on a book of business they have built up over time. They are worried about the work involved in earning their keep.
I think a merit-based compensation system would invigorate the field, and still allow those at the bottom of the heap to charge a reasonable fee close to the commissions they were previously earning (less the contingents, of course!)
Perhaps now the industry will finally recognize that Eliot Spitzer was loud wrong and totally cheap-shotted Marsh brokers when he wrote that lop-sided civil brief. It is really sad the amount of damage that Spitzer has done.
Anon hit the nail on the head. Eliott Spitzer did more damage than any other individual or companies, in his quest to be governor of NY.
He opened up litigation to the greedy trial attorneys as well as greedy clients around the U.S. thinking they could get something for nothing. He tried to implicate ALL insurance agents and companies to fraud, collusion and steering of business. We have spent tens of thousands of dollars to defend ourselves against these frivilous lawsuits that were totally unfounded. Spitzer put all of our reputations in question, totally without merit. The collusion and steering of business was limited to one or two companies in NY, yet over 21 companies and agents had to defend their practices and spend untold thousands in defense costs.
This judge was absolutely correct in throwing this suit out and judges around the country should do the same.
Once Spitzer got Marsh, trial attorney’s in nine states thought they could dip their hands in the cookie jar grab that golden financial ring.
I have spent some sleepless nights aggrevated that my reputation and insurance practice was put into question. Sadly I do not have any recourse to recoup what I lost, just chalk it up to experience and greed from clients.
M&M clearly fixed prices through their schemes of B rates and blocking markets, as well as using these to bolster contingent commissions. Some of the players have been convicted of felony crimes. Marsh has acknowledged these problems.
This criminal activity has been going on for many years…simply not racketeering under the statute, but still criminal and still price fixing according to the courts.
Spitzer did the insurance industry a grdeat service by leveling the playing field and putting a stop to practices that had long plagued the industry and stifled competition.
This subject case could not be won, their strategy was flawed from the start, and it was a derivative action that did not have the brilliance of Spitzer’s criminal complaints.
I would say that it shows up Spitzer’s brilliance…your logic is as flawed as the plaintiff’s in this case!
What’s still very painful to watch is the price of Marsh’s stock, still having not recovered, despite the elimination of a few bad apples. My respected colleagues at Marsh have been gravely impacted, none of whom deserved it. And then, NY elects Spritzer as Governor! Those people are nearly as oblivious as the good citizens of the Commonwealth of Massachusetts!
Sorry I will disagree with your comments. There may have been a couple of individuals who were theives and certainly greedy. But that was limited to Marsh and AIG. Contingent commissions are not necessarily bad and no different than any other industry who provides incentives to their sales people. Do people abuse them yes, but not all of us are crooked.
What Spitzer’s suit did was open up all insurance agents and company to scrutiny whether right or wrong. In addition, trial attorneys sank their teeth into it, indicting all agents and companies and filed suits in 9 states. Here in Florida the suit mirrored that of NY, one problem this state does not allow an agent to charge a fee and collect a commission. So the suit was flawed from the beginning and there was never steering of business since our agency only represented one company.
Don’t tell me my logic is flawed when we use state filed rates to quote gl & auto, the company uses NCCI filed work comp rates and the client made the decision to change his insurance, not us! Now I have to defend myself, my company and the insurance company has to spend tens of thousands in defense cost because of what? Because Spitzer indicted the insurance industry as a whole. By the way we have never collected a contingency commission.
So until your butt is on the line questionning your ethics and business practices don’t tell me my logic is flawed Mr. Spitzer.
Tom, I agree whole Heartedly with your statements. Legacy Broker, the companies and individuals who participated in or are participating in this manner should be punished. However, a shotgun approach to sueing insurance companies was certainly uncalled for and wasted a lot of money.
Legacy Broker – I disagree with your assessment of what took place. A few bad apples broke the law and were rightly identified and punished. The extent that Gov Spitzer and his gestapo went to extort many other companies and their representatives into “reaching an agreement” with his “investigators” by threatening them to settle or spend the next few years of their lives and millions of dollars in court and in the newspapers should be the subject of RICO proceedings.
The “Sheriff of Wall Street” has bad apples in his own house – witness the ongoing scandal of falsifying information to obtain data from the NY State Police to try and get Joseph Bruno. And how did he deal with his own bad apples? To the best of my knowledge they are still working for him in their nice state offices…
There is no argument that those that break the law should be sought out and punished – but to broad-brush an entire industry while doing that for their own benefit (press while setting up to run for Governor) is as wrong – just not illegal.
As a smaller broker, I can tell you stories from underwriters and brokers that would differ from the side of the story being told here by former M&M and large broker employees. I personally lost my first account 30 years ago to M&M when they blocked my markets, and I have heard many stories of how arrogant, threatening and abusive M&M execs could be when dealing with underwriters on behalf of their clients. While our firm rarely lost business to them head to head, they did not have a reputation for fair play. I have to admit that neither did they have a reputation for sleazy dealings that some smaller competitors had, but that does not excuse the abuses that Spitzer uncovered. I would like to hear the perspective of a risk manager, which would likely differ from that of the brokers voiceing their opinions here.
Spitzer’s expectation of the Marsh marketing process was it to be a sealed bid environment. Price fixing is not what is being debated downtown right now because there was no price fixing going on at Marsh. Also, the people that plead guilty did so out of fear after the intense threats from the Spitzer goon squad who are now gooning it up in Albany in what we all got to see in the “Dirty Tricks” scandal. May the Lord spare you having to encounter such an evil and arrogant person like Eliot Spitzer. And don’t be so niave and believe that Spitzer was fair when what he did was take snippets from Marsh e-mails as opposed to showing the full, fair and honest facts Just like he was trying to do with Joe Bruno, but this time he got caught because those in the know now know what to expect from this low life of a human being.
Legacy I understand where you are coming from and the personal disdain you have for Marsh. Personally I don’t think their practices will change.
Should they have been exposed for what the agent did? Absolutely. We don’t need that kind of garbage in our industry.
Having said that I have a problem with the way Spitzer went about his prosecution including considering Contingent Commissions racketeering. We can point fingers to other industries compensation; auto or real estate sales or even attorney’s.
We have never received a contingency commission, to label it under the guise of racketeering or to create an impression it is illegal to receive this type of compensation is irresponsible and irrational.
Your gripe is with Marsh I can see why, mine is with Spitzer and how he twisted our industry practices and equated them with say the mafia. I find him very troubling and it certainly opened the door to the trial bar to walk in and call all Independent Agents character and profession in question. Just look how many and how quickly law suits popped up around the country. I believe overall Independent Agents do a very good job for their clients and we do things legally and above board.
Legacy I appreciate your comments. I guess Florida is different since we cannot charge a fee and collect a commission, so I am a little naive to those type of billing practices. Know that I have no problem with collecting “just” a commission. Believe it or not I don’t care what the commission is since my concern is doing a service for the client. It has been my way of doing business for over 25 years. Earnings takes care of itself when you do the client right. Yes I am making this personal since this issue affects me personally. When we do a service for a client, it is no mystery we are going to get compensated and if the client wants to know how much, we tell them. When false allegations are made against us agents for doing a service, use manual rates, use NCCI filed work comp rates and hide nothing and don’t receive a contingency bonus but still have to defend our practice, it angers me. Spitzer may have been right to proceed against the Marsh agent for fixing quotes with AIG, but those actions are not indicitive of how we all do business.
When I am put into a category of that Marsh agent for selling a $3,000 yr state filed rate BOP and a $2,000 yr NCCI rate filed work comp and a $6,000 yr cauto (saving the client $2,000 from his previous company) I am angry. When allegations of steering are levied against you and you did your best and the client ultimately makes the decision to buy the insurance, how is that my fault?
Finally, when the client cancels those policies for non-payment, then goes to Nationwide Insurance, how is it that a Nationwide agent is not guilty of “steering” when the only company they can offer is Nationwide? Oh that’s right we are independent agents.
The system is out of whack, greed has taken over and we the agents are placed right in the middle. I guess that’s the casualty of a free market.
I appreciate for allowing me to vent, this has been quite theraputic.
Tom, I do feel for your plight regarding service fees…that is exactly why I believe a merit-based system should replace the current commission system. Some states (e.g. Montana) do not even allow brokers or companies to charge an inspection fee, let alone a service fee or policy fee. The commission and fee system is highly variable across the U.S. The NAIC tried to create a workable model (but many entrenched in the industry have resisted change.) The answer is NOT national regulation, which would stifle competition and result in unhealthy consolidation in all segments of the industry.
No allegations involved commoditized BOP policies, etc. That Nationwide agent is clearly an agent of the insurance carrier. If we are truly representing the policyholder, we must relinquish both standard and contingent commissions paid by the insurers to avoid a conflict of interest.
Tom, I won’t belabor the point, and will only post this explanation once. The auto dealer analogy is really not appropriate here. The lawyer analogue seems more apt, in that P&C insurance brokers are actually highly specialized contract attorneys dealing exclusively with insurance contracts. Insurance brokers have a duty to their customers (and in some states are required by law) to disclose their income when they work on a commission basis IF they charge a fee for service.
The Spitzer investigations deal with business is placed in a company for the benefit of the broker, NOT for the benefit of the client, a conflict of interest. In many cases, Spitzer demonstrated that Marsh and others manipulated proposals and bids to ensure contingent commissions for Marsh, where it was not in their clients’ interest to do this.
As a broker who worked for was a larger mid-sized broker that did the same on small to middle market accounts, and I deplored the practice that I was instructed to participate in.
It is prevalent in the industry on varying scales across the P&C brokerage spectrum. If brokers want to be respected professionals in the business community (and not hounded by trial lawyers as if they are dishonest crooks, as some here have suggested) they need to hold themselves to a higher standard of transparency and fair play.
I am a believer in a paradigm shift to merit based compensation in the insurance brokerage area. If a good attorney or risk manager can command a good fee, why not an insurance broker if they provide service of value to the client they represent?
The more able brokers would command a higher fee, the compensation structure would be transparent and the more successful brokers will earn their money based upon their expertise and ability in representing clients in their dealings with insurers.
I am convinced that those screaming loudest about loss of contingent commissions are those who are getting a free ride or are worried about a young, bright kid succeeding in a field that seemed like an easy bet, coasting on a book of business they have built up over time. They are worried about the work involved in earning their keep.
I think a merit-based compensation system would invigorate the field, and still allow those at the bottom of the heap to charge a reasonable fee close to the commissions they were previously earning (less the contingents, of course!)
Perhaps now the industry will finally recognize that Eliot Spitzer was loud wrong and totally cheap-shotted Marsh brokers when he wrote that lop-sided civil brief. It is really sad the amount of damage that Spitzer has done.
How can you say that? He is the governor now after all.
Anon hit the nail on the head. Eliott Spitzer did more damage than any other individual or companies, in his quest to be governor of NY.
He opened up litigation to the greedy trial attorneys as well as greedy clients around the U.S. thinking they could get something for nothing. He tried to implicate ALL insurance agents and companies to fraud, collusion and steering of business. We have spent tens of thousands of dollars to defend ourselves against these frivilous lawsuits that were totally unfounded. Spitzer put all of our reputations in question, totally without merit. The collusion and steering of business was limited to one or two companies in NY, yet over 21 companies and agents had to defend their practices and spend untold thousands in defense costs.
This judge was absolutely correct in throwing this suit out and judges around the country should do the same.
Once Spitzer got Marsh, trial attorney’s in nine states thought they could dip their hands in the cookie jar grab that golden financial ring.
I have spent some sleepless nights aggrevated that my reputation and insurance practice was put into question. Sadly I do not have any recourse to recoup what I lost, just chalk it up to experience and greed from clients.
what is up with Gilman trial ?
not familiar with it.
Nothing could be further from the truth…
M&M clearly fixed prices through their schemes of B rates and blocking markets, as well as using these to bolster contingent commissions. Some of the players have been convicted of felony crimes. Marsh has acknowledged these problems.
This criminal activity has been going on for many years…simply not racketeering under the statute, but still criminal and still price fixing according to the courts.
Spitzer did the insurance industry a grdeat service by leveling the playing field and putting a stop to practices that had long plagued the industry and stifled competition.
This subject case could not be won, their strategy was flawed from the start, and it was a derivative action that did not have the brilliance of Spitzer’s criminal complaints.
I would say that it shows up Spitzer’s brilliance…your logic is as flawed as the plaintiff’s in this case!
What’s still very painful to watch is the price of Marsh’s stock, still having not recovered, despite the elimination of a few bad apples. My respected colleagues at Marsh have been gravely impacted, none of whom deserved it. And then, NY elects Spritzer as Governor! Those people are nearly as oblivious as the good citizens of the Commonwealth of Massachusetts!
Sorry I will disagree with your comments. There may have been a couple of individuals who were theives and certainly greedy. But that was limited to Marsh and AIG. Contingent commissions are not necessarily bad and no different than any other industry who provides incentives to their sales people. Do people abuse them yes, but not all of us are crooked.
What Spitzer’s suit did was open up all insurance agents and company to scrutiny whether right or wrong. In addition, trial attorneys sank their teeth into it, indicting all agents and companies and filed suits in 9 states. Here in Florida the suit mirrored that of NY, one problem this state does not allow an agent to charge a fee and collect a commission. So the suit was flawed from the beginning and there was never steering of business since our agency only represented one company.
Don’t tell me my logic is flawed when we use state filed rates to quote gl & auto, the company uses NCCI filed work comp rates and the client made the decision to change his insurance, not us! Now I have to defend myself, my company and the insurance company has to spend tens of thousands in defense cost because of what? Because Spitzer indicted the insurance industry as a whole. By the way we have never collected a contingency commission.
So until your butt is on the line questionning your ethics and business practices don’t tell me my logic is flawed Mr. Spitzer.
Tom, I agree whole Heartedly with your statements. Legacy Broker, the companies and individuals who participated in or are participating in this manner should be punished. However, a shotgun approach to sueing insurance companies was certainly uncalled for and wasted a lot of money.
Legacy Broker – I disagree with your assessment of what took place. A few bad apples broke the law and were rightly identified and punished. The extent that Gov Spitzer and his gestapo went to extort many other companies and their representatives into “reaching an agreement” with his “investigators” by threatening them to settle or spend the next few years of their lives and millions of dollars in court and in the newspapers should be the subject of RICO proceedings.
The “Sheriff of Wall Street” has bad apples in his own house – witness the ongoing scandal of falsifying information to obtain data from the NY State Police to try and get Joseph Bruno. And how did he deal with his own bad apples? To the best of my knowledge they are still working for him in their nice state offices…
There is no argument that those that break the law should be sought out and punished – but to broad-brush an entire industry while doing that for their own benefit (press while setting up to run for Governor) is as wrong – just not illegal.
As a smaller broker, I can tell you stories from underwriters and brokers that would differ from the side of the story being told here by former M&M and large broker employees. I personally lost my first account 30 years ago to M&M when they blocked my markets, and I have heard many stories of how arrogant, threatening and abusive M&M execs could be when dealing with underwriters on behalf of their clients. While our firm rarely lost business to them head to head, they did not have a reputation for fair play. I have to admit that neither did they have a reputation for sleazy dealings that some smaller competitors had, but that does not excuse the abuses that Spitzer uncovered. I would like to hear the perspective of a risk manager, which would likely differ from that of the brokers voiceing their opinions here.
Spitzer’s expectation of the Marsh marketing process was it to be a sealed bid environment. Price fixing is not what is being debated downtown right now because there was no price fixing going on at Marsh. Also, the people that plead guilty did so out of fear after the intense threats from the Spitzer goon squad who are now gooning it up in Albany in what we all got to see in the “Dirty Tricks” scandal. May the Lord spare you having to encounter such an evil and arrogant person like Eliot Spitzer. And don’t be so niave and believe that Spitzer was fair when what he did was take snippets from Marsh e-mails as opposed to showing the full, fair and honest facts Just like he was trying to do with Joe Bruno, but this time he got caught because those in the know now know what to expect from this low life of a human being.
Legacy I understand where you are coming from and the personal disdain you have for Marsh. Personally I don’t think their practices will change.
Should they have been exposed for what the agent did? Absolutely. We don’t need that kind of garbage in our industry.
Having said that I have a problem with the way Spitzer went about his prosecution including considering Contingent Commissions racketeering. We can point fingers to other industries compensation; auto or real estate sales or even attorney’s.
We have never received a contingency commission, to label it under the guise of racketeering or to create an impression it is illegal to receive this type of compensation is irresponsible and irrational.
Your gripe is with Marsh I can see why, mine is with Spitzer and how he twisted our industry practices and equated them with say the mafia. I find him very troubling and it certainly opened the door to the trial bar to walk in and call all Independent Agents character and profession in question. Just look how many and how quickly law suits popped up around the country. I believe overall Independent Agents do a very good job for their clients and we do things legally and above board.
Legacy I appreciate your comments. I guess Florida is different since we cannot charge a fee and collect a commission, so I am a little naive to those type of billing practices. Know that I have no problem with collecting “just” a commission. Believe it or not I don’t care what the commission is since my concern is doing a service for the client. It has been my way of doing business for over 25 years. Earnings takes care of itself when you do the client right. Yes I am making this personal since this issue affects me personally. When we do a service for a client, it is no mystery we are going to get compensated and if the client wants to know how much, we tell them. When false allegations are made against us agents for doing a service, use manual rates, use NCCI filed work comp rates and hide nothing and don’t receive a contingency bonus but still have to defend our practice, it angers me. Spitzer may have been right to proceed against the Marsh agent for fixing quotes with AIG, but those actions are not indicitive of how we all do business.
When I am put into a category of that Marsh agent for selling a $3,000 yr state filed rate BOP and a $2,000 yr NCCI rate filed work comp and a $6,000 yr cauto (saving the client $2,000 from his previous company) I am angry. When allegations of steering are levied against you and you did your best and the client ultimately makes the decision to buy the insurance, how is that my fault?
Finally, when the client cancels those policies for non-payment, then goes to Nationwide Insurance, how is it that a Nationwide agent is not guilty of “steering” when the only company they can offer is Nationwide? Oh that’s right we are independent agents.
The system is out of whack, greed has taken over and we the agents are placed right in the middle. I guess that’s the casualty of a free market.
I appreciate for allowing me to vent, this has been quite theraputic.
Tom, I do feel for your plight regarding service fees…that is exactly why I believe a merit-based system should replace the current commission system. Some states (e.g. Montana) do not even allow brokers or companies to charge an inspection fee, let alone a service fee or policy fee. The commission and fee system is highly variable across the U.S. The NAIC tried to create a workable model (but many entrenched in the industry have resisted change.) The answer is NOT national regulation, which would stifle competition and result in unhealthy consolidation in all segments of the industry.
No allegations involved commoditized BOP policies, etc. That Nationwide agent is clearly an agent of the insurance carrier. If we are truly representing the policyholder, we must relinquish both standard and contingent commissions paid by the insurers to avoid a conflict of interest.