Plumeri Talk Sparks Controversy

Plumeri Talk Sparks Controversy PIA slams Plumeris call to end contingency fees at RIMS

A call by the head of a large brokerage last week for the entire insurance industry to abandon scandal-plagued incentive fees sparked an angry debate between a big brokers trade group and an organization representing Mom-and-Pop agencies.

At issue were the remarks by Joe Plumeri, chief executive officer of Willis, who was slammed by the National Association of Professional Insurance Agents after he appeared at the annual conference of the Risk and Insurance Management Society and said there should be an end to contingent commissions that encompassed what PIA calls Main Street agents as well as large brokerages.

“This is a hypocritical suggestion, in that it comes from the CEO of the nation's third-largest insurance brokera firm that earlier this month agreed to pay $51 million in restitution to policyholders to resolve concerns about anticompetitive practices involving incentive fees in property and casualty insurance sales,” said Leonard Brevik, executive vice president and CEO of PIA National.

Documents filed with the New York settlement agreed to by Willis two weeks ago included communications revealing that Willis steered customers to insurers that paid it incentive commissions and had inflated charges by unnecessarily routing business through its wholesale brokerage unit.

“The timing of Mr. Plumeri's comments makes them particularly dubious,” said Mr. Brevik.

Willis is a member of the Washington-based Council of Insurance Agents & Brokers, which instantly leapt to the defense of Mr. Plumeri.

CIAB President Ken Crerar declared: We take issue with PIA's attack on a prominent leader in the brokerage business. Inflammatory words such as dubious and hypocritical are wrong and misguided.”

Mr. Crerar said his organization “will never attempt to dictate a business model to its member firms or the broader industry.

Persons of goodwill may have honest disagreements about incentive compensation.”

He added that the PIA “is missing the point entirelyfull and complete compensation transparency by insurance producers. Clients deserve it and many are demanding it.

The sooner industry groups stop finger-pointing and disparaging one another and support a standard for compensation disclosure,the more trust we'll earn from consumers, and we can all move on.

Mr. Brevik remarked that New York Attorney General Eliot Spitzer, whose investigation unleashed an avalanche of insurance industry probes by other states, has clarified his position to distinguish between mega-brokers and Main Street agents. He noted that, in a speech in January, Mr. Spitzer said he did not think contingent commissions should be banned industrywide and that most agents and brokers are honest.

Mr. Brevik added he hopes Willis CEO Plumeri, like Mr. Spitzer, develops a better understanding of the various participants in the insurance industry.

Mr. Crerar said, PIA and others seem to think that transparency is good only for some commercial insurance transactions.

At weeks end, the PIA was not responding to requests for further comment, but at the CIAB, Cheryl Arvidson, assistant director for strategic communications, said the PIA has a perfect right to take whatever position it wants.

CIAB takes the stance, she said, that there is no reason to keep compensation arrangements secret.

Reproduced from National Underwriter Edition, April 15, 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.