Speak Up Before The Fat Lady Sings
Independent agent associations are not very happy with Consumer Reports, which recently published a piece on N.Y. Attorney General Eliot Spitzer's probe into broker contingency fees and the suit filed against Marsh & McLennan Companies. The magazine essentially told its readers that to avoid potential bid-rigging they should avoid independent agents.
The National Association of Professional Insurance Agents sent a letter to Consumer Reports charging that the publication inaccurately characterized the way independent agents do business. The Independent Insurance Agents & Brokers of America also weighed in, but more needs to be done to maintain the independent agent's well-earned reputation for integrity.
Independent agents should feel justifiably upset with Consumer Reports for painting them with such a broad brush. To date, Mr. Spitzer has not brought an action against any independent agent indicating kickback or other improprieties.
Agents, and their associations, are quick to point out that the Spitzer suit involved the world's largest brokerageMarshwhere producers allegedly leveraged their market clout to compel carriers to agree to their schemes. The alleged wrongdoing, the agents say, was not endemic but confined to a few bad apples. Unfortunately, they added, in any large organization there may be a few whose integrity is questionable.
Integrity is the core of an independent agent's relationship with clients. Customers stick with their agents not necessarily because they get the best priceas there are many other factors to consider when placing coveragebut because they feel the agent has their best interest at stake.
Still, the cloud sitting over the industry could be having an effect, however subtle. The insurance industry already suffers from a bad reputation among consumers, and this ongoing investigation can't help. Generally, agents say clients continue to trust thembut will continued allegations undermine that trust, especially if Mr. Spitzer makes good on his recent threat that the personal lines business is next on his radar?
Agents feel they have done nothing wrong. They work on commission and receive a bonus based on performance, just like most other sales people. Their contingent compensation differs from the big brokers because it is based on profitability, not volume. Plus, they don't have the same muscle as Marsh to manipulate carriers.
However, outside of the industry, clients can't help but hear about criticism from Mr. Spitzer, Consumer Reports and others. Agents complain they are not guilty, but are those assertions registering with consumers? Agents have plenty of talking points to use when meeting with clients, but a broad, public message is missing.
The IIABA (with its "Trusted Choice" program) and Progressive Insurance (with its "Drive" ad campaign) are working to positively brand independent agents. Their message should not be lost to a scandal. Agents and companies must address the issue of integrity now, and not wait to hear from the grassroots membership that there's a problem.
WalMart just spent a few million dollars defending its image with an ad campaign ticking off the benefits employees receive in an effort to counter a growing chorus of criticism, before its reputation is ruined. It seems reasonable to say that PIA, IIABA, the Council of Insurance Agents and Brokers, and all their company partners should band together and defend the reputation of independent agents now, before a chorus of distrust and discontent rises against the system.
Don't wait for the fat lady to begin warming up in the wingsor is that a warble I just heard?
Mark Ruquet
Assistant Editor
Reproduced from National Underwriter Edition, January 27, 2005. Copyright 2005 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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