In George Orwell's allegorical novel Animal Farm, the collective's credo was ”All animals are equal” — until the leaders change the credo to ”All animals are equal, but some animals are more equal than others.”

The same might be said for regulators' handling of contingent commissions.

In one of my first blog posts at “Agent for Change,” I threw out the question of whether contingent commissions should be an industry practice, considering the controversy surrounding them. At the time, N.Y. AG Cuomo was reexamining the issue and the consensus was that contingent commissions were bad.

More than a year later, the tide may be turning — at least for some. This week, state regulators and AGs in New York, Illinois and Connecticut have allowed Willis, Aon and Marsh to bring back contingent commissions. The thinking goes that the three brokers and their carriers have implemented enough transparency to free them from the settlements they signed in 2005. The new agreement also reduces the brokers' disclosure requirements in all 50 states to that required in the New York agent/broker disclosure regulation, released last week.

This rankles Main Street agents, who are bothered by the fact that the New York DOI felt it necessary to promulgate its new regulation as a condition of the big brokers' release, said Wes Bissett, senior counsel for the Big I. They're so bothered that IIABNY plans on filing a legal challenge, both to the “substance of the regulation and the manner in which is was promulgated,” Bissett said in a phone interview. “It is ironic and disappointing to us that thousands of innocent Main Street agents are facing a series of costly new burdens and mandates so that the world's three largest insurance brokers can be freed from settlements they voluntarily entered into five years ago,” he said. “The result is thousands of Main Street agents will be paying the price for what they did.”

Calling the New York regulations “unnecessary” and a “hypothetical, law-school approach” to transparency, Bissett said smaller retail agents required to follow the regulations can't simply use a boilerplate approach to compliance, and often need to work with outside counsel to develop the right approach, making the process time consuming and expensive at a time when agencies need to watch every penny.

And relying on a ruling from a regulator rather than going through the legislative process is wrong, too. “Public policy should be left to lawmakers, not regulators,” he added.

PIA National agrees, calling the New York regulation “burdensome, unnecessary and unwarranted.” Through amicus briefs, public testimony and other action, PIANY has continued to oppose the reg — even though it does not ban contingency commissions, something PIA members have members have vehemently supported, maintaining that Main Street agents are not mega-brokers and contingent commission income is critical to their ability to serve their clients.

Not surprisingly, more sanguine on the subject is CIAB, whose spokesperson in an e-mail stated that, “We've been long-time supporters of transparency, and long believed that intermediaries should have the benefit of the same regulatory and legal environments, with the freedom to determine their own business models. Now that they do, we believe it's time for the industry to put this issue behind us and move forward – it's been a distraction for far too long.”

Unfortunately, the end of the issue may not be in sight. With consumers still smarting from financial services bailouts and excuses, overturning some brokers' transparency requirements could very well bring new public attention to a practice that's contentious at best.

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