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To the editor: Here are some considerations from a longtime observer of the insurance business world.
Contingent commissions are the symptoms, not the disease. The disease is greed and dishonesty from some brokers and insurers. In newspapers, if we see so many "agrees to pay xx million, admits no wrongdoing," is it because this is the tip of the iceberg?
The attitude of the insurance buyers' world has been astonishing. For example, it is not the Risk & Insurance Management Society Inc. that has been the most important factor in denouncing abuses, bid rigging, etc., but government representatives. And the business establishment always wants less government controls, and maybe we know why!
It seems the lesson is still not concrete as the brokers' changes are only seen as cosmetic. We need more support than that. What is the broker's interest to lowering the costs to his client? When will the buyer community see that brokers' compensation systems do not make them an ally? Brokers are firstly working for themselves, as do other businesses, and the more a client spends on insurance, the better it is for the sellers. It is that simple.
At the present time, the best way to make sure a buyer is getting the best deal in the market is to regularly seek a truly competitive "request for proposals" from more than one broker, with assigned insurance markets and a close follow-up. Even this was curtailed in past years with buyouts and the drastic reduction in the number of brokers, limiting competition.
For a real change and a true and honest approach, brokers should be paid as risk management advisers on a similar basis as legal advisers and accounting firms. When some of these firms were convicted of wrongdoing in the past, at least they weren't acting against their clients' direct interest, but rather serving their own interests. This is a small consolation, but it illustrates the principle.
With what we have read in the newspapers over the years, one should ask this question: If some insurers and brokers had so little care for insurance buyers, what kind of care do they have in settling large, difficult and complex claims?
One of the first things I was taught by a wise man early in my insurance career was caveat emptor, or let the buyer beware. This is true more than ever, it seems.