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Member, Beacon International Group, Ltd.
RISK MANAGERS should have something to say about broker compensation and quality in the insurance industry.
Those were two of the main themes arising last week at the Risk & Insurance Management Society Inc.'s Annual Conference & Exhibition in New Orleans. RIMS President Michael Liebowitz urged risk managers to push their service providers to improve quality.
We agree. Even if buyers don't think they're in the driver's seat, they should take the wheel. Timely coverage quotes and prompt delivery of complete and accurate policies should be the rule, not the exception. Improving quality should never be a regulatory matter--the consumer should dictate that.
Broker compensation came up in several discussions at RIMS, notably during Tuesday's panel of chief executive officers (see stories, beginning on page 11). Debate on this issue continues. While several of the largest brokerage firms agreed to give up contingent compensation in 2004 and 2005, last year brought a new wrinkle: proprietary supplemental commissions designed by insurers, which several state attorneys general approved for both brokers and agents.
Willis Group Holdings Ltd. last week became the first broker to say it would not accept the new arrangements. Arthur J. Gallagher & Co. earlier said it would accept supplemental pay. Aon Corp. and Marsh Inc. are still analyzing the payment structure.
Transparency and disclosure are crucial in risk managers' relationships with their brokers, but that should be only a starting point. When it comes to who pays brokers and how much, brokers and insurers should not be able to negotiate a portion of that payment on their own. Risk managers need to be heard, and they won't be unless they speak up.