Where Is The Outrage?
If I were a risk manager and heard that brokers were accused of colluding with insurers behind the backs of clients to artificially boost premiums, I would be furious! I would be banging on my own brokers desk, demanding documentation that my account had been objectively shopped. I would be on the phone to the Risk and Insurance Management Society, demanding to know what my association was doing about this!
How strange it is, then, that risk managers and RIMS have been so quiet in the wake of New York Attorney General Eliot Spitzers explosive allegations of bid-rigging and fee abuse.
RIMS did lead the fight to force brokers to reveal contingency deals back in 1999although it was on a "Dont Ask, Dont Tell" basis. It wasnt until Mr. Spitzer launched his probe that RIMS recommended full disclosure before a policy is sold, whether buyers asked about fee deals or not.
However, since Mr. Spitzer revealed his smoking guns and promised more mayhem to come, RIMS has been missing in action.
RIMS President Nancy Chambers is sticking by a brief statement, noting the group is "shocked by the allegations of illegal activities and their effects on our members," "distressed by the allegations appearing daily" and "disappointed in the individuals who have pled guilty to wrongdoings." She promised to keep members informed, reiterated prior statements on disclosure, and said she "hopes that these are isolated incidents."
We havent been able to get any further comment out of Ms. Chambers. We have also been unable to secure an interview with the new executive director at RIMS, Mary Roth, since she took her post on Oct. 19, right in the thick of the Spitzer extravaganza.
What is going on here??? RIMS officials should be screaming their heads off, demanding broad reform in the brokerage industry. They should be calling on insurers to explain what premium adjustments, if any, will be made to reflect the fact that terminated contingency deals will save them hundreds of millions in fees.
RIMS should be running seminars around the country on broker compensationhow to monitor the bidding process, what to look for in terms of disclosure of any side deals, and how to negotiate a direct brokerage fee (rather than letting the insurer pay) so there is no longer any doubt about who a broker is really working for.
I am not alone in my dismay about the meek reaction of those being ripped off. New York Insurance Superintendent Gregory Serio, in a recent talk, also was at a loss to understand the "strange" and "curious" silence by risk managers.
Perhaps Mr. Serio is right in speculating that the silence of individual risk managers might be simple embarrassment about being hoodwinked. But what is RIMS excuse for laying low? Could RIMS be nervous about biting the hands that feed it, as big brokers and big insurers deliver big bucks in conference sponsorships and exhibit space?
RIMS counterpart in Europethe Association of Insurance and Risk Managershas already polled members: 93 percent want to see broker contingent deals banned or subject to further investigation. What do RIMS members think?
I can only hope RIMS speaks up loud and clear this week, when the association testifies at a Senate hearing on the Spitzer probe. These are the people the government is protecting from market manipulation, but Mr. Spitzer and his crusading reformers cannot do it alone. Ultimately, buyers must stand up for themselves and demand accountability from their vendors.
Sam Friedman
Editor-In-Chief
Reproduced from National Underwriter Edition, November 11, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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