Fees Are Okay, Say Insurer Trade Orgs

By Arthur D. Postal, Washington Bureau Chief

NU Online News Service, Nov. 10, 4:27 p.m. EDT?Trade groups representing most property-casualty agents and brokers have advised a regulators task force they believe incentive compensation programs are appropriate and legal.[@@]

The task force of the National Association of Insurance Commissioners has been examining incentive fees in the wake of the New York Attorney General's lawsuit charging that the fees have served as kickbacks in a bid rigging scheme by Marsh Inc. brokerage.

In contacting regulators the groups were displaying a concern that state regulators may overreact to the current broker fee scandal,

At the most, officials of the Independent Insurance Agents and Brokers of America and the Council of Insurance Agents and Brokers told the NAIC task force in separate letters, beefed-up disclosure should be the order of the day, not onerous restrictions.

The implication from the two letters is that retention of incentive compensation is the line in the sand for the agent/broker industry in any model law crafted by the NAIC.

Their letters were sent to a 12-member task force called the NAIC Executive Task Force on Broker Activities which was scheduled to deliberate all day tomorrow on a draft model law dealing with the issue.

The panel is headed by NAIC president Diane Koken who is Pennsylvania insurance commissioner.

At the same time, also in a letter send to the Task Force, officials of the National Association of Mutual Insurance Companies cautioned the commissioners that the NAIC should not be "distracted" from creating a market-based insurance regulatory system by New York the commission fee probe.

In its letter, the IIABA said, "There is nothing inherently wrong with such payments that reward performance excellence."

In the letter, signed by Robert Rusbuldt, CEO, and Wesley Bissett, senior vice President, government affairs and state relations, the so-called Big I said, "Performance excellence is compensated in virtually every industry, sales or otherwise, whether measured by the amount or quality of business produced, administrative savings generated, speed and quality of customer service, or other criteria."

However, IIABA does believe, the letter continued, "that a broker who receives incentive compensation from insurers in addition to commission payments should disclose that fact to consumers."

In its letter, the CIAB said it this way, "For many years, contingency commissions have been a legal and proper method of compensation for extra services provided by the broker to the insurance carrier on behalf of the commercial client. With proper disclosure of compensation practices, and absent illegal and unethical practices such as bid rigging, we believe this legitimate method of compensation should not be further restricted."

Reflecting a position also stated by the "Big I," the CIAB said in a letter signed by Ken Crerar, president, that it believes that the NAIC inquiries "be as uniform and coordinated as possible in order to lighten the burden to both industry and regulators."

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Fees Are Okay, Say Insurer Trade Orgs

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