How can contingency fee deals be reconciled with the producer's ethical obligation to clients? That's the latest “Question of Ethics” being posed to NU's readers by our ethics columnist, Peter Kensicki, a professor of insurance at Eastern Kentucky University, as well as a member of the CPCU Society's Ethics Committee. Read on for more details about this ethical challenge and how to respond, both in this blog and directly to Prof. Kensicki.
Prof. Kensicki notes that many agents–that is, those who represent insurers by contract–believe they act primarily in the interest of the insured. This “dual agency” status–representing both insured and insurer–presents many potential conflicts of interest for a producer.
Such conflicts came under the harsh glare of New York Attorney General Eliot Spitzer's spotlight when his probes revealed that major brokerages schemed with carriers to rig bids to trigger lucrative, volume-based bonus commissions.
Now many big brokers are suggesting that all such contingency compensation might best be banned, much to the chagrin of Main Street independent agencies, none of which have been found to have done anything wrong.
Are such deals ethical? What is the best way for the agent to ethically resolve potential conflicts? Will disclosure alone do the trick?
Please post your responses to this blog below, and/or e-mail your comments directly to Prof. Peter Kensicki no later than Jan. 31, 2007, at ethics@eku.edu, or mail them to his attention at Eastern Kentucky University, 030 College of Business and Technology Center, Richmond, Ky., 40475-3101. The identities of all respondents will be kept strictly confidential.
Prof. Kensicki's column on this topic will appear in the March 5, 2007 edition of NU.
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