NU Online News Service, Oct. 20, 4:30 p.m.EDT

The Public Risk Management Association released a statementtoday calling on insurance brokers to disclose all theircompensation arrangements with insurers to the public jurisdictionsthey deal with.

PRIMA's statement follows by six days a similar call by the Riskand Insurance Management Society Inc. that came with their issuanceof "A Practical Guide to Insurance Broker Compensation andPotential Conflicts of Interest for the Risk Manager."

Broker compensation has been a point of controversy since 2005,when an investigation by the New York State Attorney General'sOffice revealed that commercial insurance brokers had acceptedundisclosed contingency payments from insurers for steeringcustomers to insurers who were involved in rigging prices.

"Transparency in government is a pre-requisite to financialoversight and budgetary control regardless of the size and make-upof the public entity. Public sector employees are held to highstandards of transparency whenever they provide programming andservices to their communities. These high standards are especiallypertinent when it comes to the management of public funds," PRIMAsaid.

The Alexandria, Va.-based association is the largest associationdedicated solely to risk management in the public sector, withmembership of more than 2,000 public entities in over 1,800jurisdictions of varying sizes, budgets and complexities.

PRIMA said in the statement that it would like to "reiteratethat full and mandatory disclosure of ALL forms and sources ofbroker compensation should be provided to purchasers ofinsurance."

PRIMA first took a position in 2004, stating that the "recentinvestigations, allegations, and admissions have renewed interestand concern regarding this longstanding compensation mechanism." Inthe 2004 statement, PRIMA said it expected and hoped investigationswould confirm that "the illegal practice of bid-rigging is uncommonin the industry and limited to a very few individuals within theindustry who stepped outside the bounds of acceptable ethicalbehavior."

PRIMA said transparency in broker compensation is important forthe following reasons:

o The disclosure of broker compensation that is concurrent withthe release of insurance program information is fiscallyresponsible; therefore, all costs associated with an insurancepurchase are captured as a cost to the program whenever the policyis bound.

o Complete transparency is the only way to maintain trust in thepurchasing process. Public sector employees are subject to intensepublic scrutiny and are charged with the public trust.

It added that the conduct of risk managers and other publicemployees and officials "must always be professional andabove-board. This means that the transactions they are involvedwith must be done in good faith and with complete integrity. Thedivulging of potential conflicts of interest gives support totransparency and promotes open communications between the engagedparties."

PRIMA said it supports efforts that encourage and enforce fulldisclosure of insurance commissions or "other payment relationshipsthat could either affect the placement of insurance coverage orhave the appearance of such an impact."

PRIMA said it will "continue to advocate for open dialogue onthis matter."

In the wake of the 2005 broker scandals, some major firms agreedto drop contingent commissions. Many others did not, but said theywere adopting increased transparency standards.