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Member, Beacon International Group, Ltd.
NEW YORK--The Risk & Insurance Management Society Inc. has called again for the prohibition of placement service agreements and contingent compensation arrangements "for any broker or agent acting on behalf of a buyer."
In a statement on industry compensation and placement practices issued Wednesday, New York-based RIMS also said it believes that "all sources of compensation, direct and indirect, now or in the future, should be disclosed to clients without their request."
"Much has changed since RIMS issued its August 2005 statement on industry compensation and placement practices," said RIMS in its statement. "In response to regulatory matters and settlement agreements, many brokers pledged to refuse to accept placement fees from insurers on business where they represent the buyer. RIMS applauded this action and supported the prohibition on the use of placement service agreements or other similar arrangements for the entire broker industry. We are disappointed to learn that some brokers are apparently reconsidering their pledge to refuse to accept these fees."
The statement said that "for brokers and independent agents to accept these fees in transactions that are made on behalf of the buyer represents an inherent conflict of interest. The recent investigations, admissions and fines demonstrate how these practices can be manipulated to the disadvantage of the insurance buyer.""Risk managers must evaluate the level of transparency and full disclosure in their broker relationships," RIMS said in its statement. "To effect change, risk managers must vocalize their concerns and hold their providers accountable."