Agents Criticize RIMS’ Lack of Support for Contingent Commissions

June 6, 2007

California’s Alliance of Insurance Agents and Brokers has issued a statement, criticizing the Risk and Insurance Management Society’s support of eliminating contingent commissions.

In May, RIMS called contingent commissions “an inherent conflict of interest” and noted it was disappointed that some in the insurance industry continue to promote contingent compensation. The 10,000-member group said it is “troubled” that some in the insurance industry continue to promote contingent compensation even after “recent investigations, admissions and fines demonstrate how these practices can be manipulated to the disadvantage of the insurance buyer.”

The compensation plans being questioned traditionally involve payments to brokers after they place a certain volume of business with an insurer or meet other performance criteria such as profitability or business retention, RIMS said.

In response, Gary Jensen, president of the Alliance, issued the following statement:

“Whether producers are acting as an agent or broker, they are still responsible for conducting thorough front-line underwriting and adhering to the carrier’s underwriting rules. When the producer’s thoroughness and professionalism result in profitable results for the carrier, there is no reason why the carrier should be prevented from rewarding the agent or broker with a contingency bonus.

“A clear line must be drawn between legitimate contingency bonuses, versus bonuses paid to firms as an incentive for steering business from one insurer to another,” Jensen added. “The Alliance agrees that those involved in the underhanded deals must be punished. However, regulators, politicans and industry officials must understand this distinction and avoid knee-jerk reactions that punish honest, reliable agents and brokers.”

Sources: RIMS, Agents Alliance

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