The party is literally over at American International Group, as the beleaguered company scrapped plans to host a second lavish junket to reward top-performing agents in the wake of a tsunami of criticism for continuing to live the high life, throwing a $400,000-plus celebration for life producers after begging Uncle Sam for not one, but two massive loans topping $120 billion to keep the organization afloat.

AIG was politically tone-deaf to go forward with its sweet retreat for loyal life agents–right after nearly going under and threatening to take the entire financial system with it. The criticism from Washington came fast and furious.

“Average Americans are suffering economically, said Henry Waxman, D-Calif., chair of the House Oversight and Government Reform Committee that grilled AIG executives earlier this week about how its crisis came about. They are losing their jobs, their homes and their health insurance. Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most expensive resorts in the nation.

AIG's new CEO, Ed Liddy, tried to defuse the criticism with a letter to Treasury Secretary Henry Paulson, explaining that the event at the St. Regis Monarch Beach Resort in Southern California was not for senior company executives, but for top-selling life producers.

But that explanation really came across as lame as the meltdown on Wall Street continues, which is no doubt why the company decided to cancel another event for property-casualty agents set for the Ritz-Carlton at California's Half Moon Bay.

Mr. Liddy wrote that going forward, AIG understands that its situation has changed, and that “we owe our employees and the American public new standards and approaches.

To be honest, even if AIG's financial woes hadn't occurred, these types of junkets are still ethically questionable in the eyes of the industry's critics.

Bob Hunter, insurance director at the Consumer Federation of America, e-mailed me shortly after the lambasting AIG took at Tuesday's congressional hearing, noting that even though the event that did go forward was geared towards agents and not company executives, “this is worse than [doing it for] employees, since hidden producer rewards is what [New York's former attorney general, Eliot] Spitzer nailed AIG for in the first place.”

Paying hundreds of thousands of dollars to treat producers to a week at a swank resort begs the question: Are supposedly independent agents really placing their clients with the best product at the best price, or just with the carrier that will send them to the nicest vacation resort?

If indeed AIG is offering the best deal, that should win the day in the free market. Agents should receive a commission (or, better yet, a fee straight from the buyer) for their work. Any additional “incentives” from carriers–especially doling out spa treatments while policyholders lose their shirts in the stock market–comes across as bribes to lure agent placements.

It's time to really play it straight with insurance buyers–both commercial and individual. Full disclosure of all compensation–parties included. If agents and brokers hesitate to tell their clients what they receive in return for doing business with carriers, the question then becomes, what are they ashamed of?

What do you folks think?

Special Reports /

The Party's Over For AIG Agents

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