This is essentially a useless argument on all sides – for or against contingent commissions – until the risk managers willing agree to an audit of their insurance and risk management programs by a UNBIASED third party.
If it is found that the entity for whom the risk manager works is getting the best and broadest coverage at the best possible price – then what difference does it make if contingent commissions are paid.
If, however, it is discovered that the risk manager is getting inferior coverage and/or a higher price than should be expected – then the risk manager isn\’t doing his/her job – again, what difference do contingent commissions make, it isn\’t the brokers fault the RM \”settled\” for inferiority.
When risk managers WILLINGLY allow their programs to be reviewed by an outside consultant – then they can make the argument against contingencies – until then, this is all just a SMOKE SCREEN!
Do you – Risk Manager – prefer dealing with an \”AGENT\” or a \”BROKER?\”
An \”Agent,\” by definition, works for the insurance company as its – agent. How the insurance company pays its agent is NONE OF YOUR BUSINESS.
A \”Broker,\” by definition, works for the client – and has no authority to bind the insurance company to anything. \”Brokers\” don\’t have contracts with the insurance company writing the business – so maybe you, RM, do want to know how much is being paid as it directly affects the price. Since the \”Broker\” doesn\’t have a contract with the insurance company – contingent commissions aren\’t part of the equation.
Before you \”knee jerk,\” I realize these are historical definitions that have lost their differentiation and have become interchangebale – but the point is WHAT POSSIBLE DIFFERENCE DOES IT MAKE TO YOU, DEAR RM, HOW I GET PAID IF YOU ARE GETTING THE BEST COVERAGE AND PRICING?
Just thought I\’d ask because if you do away with contingent commissions, prices WILL go up – \’cause agents just won\’t care what they place with the carriers and as losses go up – so do prices.
Not the agents the CEO\’s/CFO\’s of the companies.
The agencies have suffered tremendously in the past few years.Now everything is supposed to be accounted for.
Don\’t know what happened with the 4 e-mails but I needed to add this.
Why is it that someone with perfect credit and no debt and no moving violations any incidents at all has a auto premium range from $550 to $850 a year all with the same coverage?
TX – The way I look at it is — a broker (I am a broker) makes $X working on one deal. That $X must pay the broker for all the time he/she spends working on deals that fail to close. It must pay the broker for any work done after the deal closes – like issuing certs. So, a broker\’s effective hourly rate cannot be the $$ made on a deal divided by the hours worked on that one deal. Its $$ made annually divided by hours worked annually. On this basis, most brokers probably make $100-300 per hour, I\’d guess. Whether the consumer wants to pay brokers a fee for service vs allowing brokers to be paid by carriers depends, I suppose, on things like buyer\’s perception of broker\’s professionalism, buyer\’s perception of conflict of interest when broker paid by insurer, etc. Unsophisticated buyers may think that it costs them nothing when brokers are paid by commission – but that is, I believe, completely wrong.
IF they REALY believe in this compensation issue
100% of their compensation to their broker wouls be fee only
hourly on annually
then they would require all companies not to pay either profit commission or regular commissions
Risk Managers should never accept an exclusive for a Broker or Agent to market the account if Contingent Commissions are still in play.
However when client losses materially affect Broker or Agent\’s income how can they be so saint like to provide exactly the same advise as they would without contingent commissions? I believe they are mostly honorable persons and companies, but not Saints.
Contingent commisions have been a part of the compensation formula for Insurance companies and their agents for over 100 years. This formula exists in similiar formats in most industies. Does Coke compensate the distributer that sells one case of coke a year, the same as they would compensate the distributer that sells 2 million cases a year? No, that is correct.
I have an idea, lets do an investigation on how lawyers are compensated. Perhaps they should recieve a flat $ 200 fee for every case they take, regardless of the complexities or parameters of that case. Maybe 40% is too large a % of a settlement. Better yet, lets have them pay the defense costs of the defendents in frivilous lawsuits, that is common sense, we havent seen an investigation into that, have we. Lets also investigate every Risk Manager and how they are compensated, and how the sales people in their organization\’s compensation plans are handled. Cheers to Mr. Kelly & Liberty Mutual for standing up to this witch hunt. Our compensation is not your business and yours is not my business. Please let the Market decide! Thank you.
Just how many of these delightful CEO\’s accept a \”contingent\” payment of stock from the companies they are the executives of? Much more that their \”salary\”. They get to keep stock options, etc. long after they have left the battlefield & laugh at the struggling survivors trying to straighten out the mess they left. What about transparency or just taking it away?
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Thank you Bond man for a clear and concise description of the reality vs what the idiots have twisted the reality to be.
This is essentially a useless argument on all sides – for or against contingent commissions – until the risk managers willing agree to an audit of their insurance and risk management programs by a UNBIASED third party.
If it is found that the entity for whom the risk manager works is getting the best and broadest coverage at the best possible price – then what difference does it make if contingent commissions are paid.
If, however, it is discovered that the risk manager is getting inferior coverage and/or a higher price than should be expected – then the risk manager isn\’t doing his/her job – again, what difference do contingent commissions make, it isn\’t the brokers fault the RM \”settled\” for inferiority.
When risk managers WILLINGLY allow their programs to be reviewed by an outside consultant – then they can make the argument against contingencies – until then, this is all just a SMOKE SCREEN!
Do you – Risk Manager – prefer dealing with an \”AGENT\” or a \”BROKER?\”
An \”Agent,\” by definition, works for the insurance company as its – agent. How the insurance company pays its agent is NONE OF YOUR BUSINESS.
A \”Broker,\” by definition, works for the client – and has no authority to bind the insurance company to anything. \”Brokers\” don\’t have contracts with the insurance company writing the business – so maybe you, RM, do want to know how much is being paid as it directly affects the price. Since the \”Broker\” doesn\’t have a contract with the insurance company – contingent commissions aren\’t part of the equation.
Before you \”knee jerk,\” I realize these are historical definitions that have lost their differentiation and have become interchangebale – but the point is WHAT POSSIBLE DIFFERENCE DOES IT MAKE TO YOU, DEAR RM, HOW I GET PAID IF YOU ARE GETTING THE BEST COVERAGE AND PRICING?
Just thought I\’d ask because if you do away with contingent commissions, prices WILL go up – \’cause agents just won\’t care what they place with the carriers and as losses go up – so do prices.
Not the agents the CEO\’s/CFO\’s of the companies.
The agencies have suffered tremendously in the past few years.Now everything is supposed to be accounted for.
Don\’t know what happened with the 4 e-mails but I needed to add this.
Why is it that someone with perfect credit and no debt and no moving violations any incidents at all has a auto premium range from $550 to $850 a year all with the same coverage?
TX – The way I look at it is — a broker (I am a broker) makes $X working on one deal. That $X must pay the broker for all the time he/she spends working on deals that fail to close. It must pay the broker for any work done after the deal closes – like issuing certs. So, a broker\’s effective hourly rate cannot be the $$ made on a deal divided by the hours worked on that one deal. Its $$ made annually divided by hours worked annually. On this basis, most brokers probably make $100-300 per hour, I\’d guess. Whether the consumer wants to pay brokers a fee for service vs allowing brokers to be paid by carriers depends, I suppose, on things like buyer\’s perception of broker\’s professionalism, buyer\’s perception of conflict of interest when broker paid by insurer, etc. Unsophisticated buyers may think that it costs them nothing when brokers are paid by commission – but that is, I believe, completely wrong.
IF they REALY believe in this compensation issue
100% of their compensation to their broker wouls be fee only
hourly on annually
then they would require all companies not to pay either profit commission or regular commissions
…the risk managers want their cake &/////
Risk Managers should never accept an exclusive for a Broker or Agent to market the account if Contingent Commissions are still in play.
However when client losses materially affect Broker or Agent\’s income how can they be so saint like to provide exactly the same advise as they would without contingent commissions? I believe they are mostly honorable persons and companies, but not Saints.
Contingent commisions have been a part of the compensation formula for Insurance companies and their agents for over 100 years. This formula exists in similiar formats in most industies. Does Coke compensate the distributer that sells one case of coke a year, the same as they would compensate the distributer that sells 2 million cases a year? No, that is correct.
I have an idea, lets do an investigation on how lawyers are compensated. Perhaps they should recieve a flat $ 200 fee for every case they take, regardless of the complexities or parameters of that case. Maybe 40% is too large a % of a settlement. Better yet, lets have them pay the defense costs of the defendents in frivilous lawsuits, that is common sense, we havent seen an investigation into that, have we. Lets also investigate every Risk Manager and how they are compensated, and how the sales people in their organization\’s compensation plans are handled. Cheers to Mr. Kelly & Liberty Mutual for standing up to this witch hunt. Our compensation is not your business and yours is not my business. Please let the Market decide! Thank you.
Just how many of these delightful CEO\’s accept a \”contingent\” payment of stock from the companies they are the executives of? Much more that their \”salary\”. They get to keep stock options, etc. long after they have left the battlefield & laugh at the struggling survivors trying to straighten out the mess they left. What about transparency or just taking it away?