IIABA President Calls Disclosure Drive "A Bunch Of Hooey"

WASHINGTON--The drive for increased disclosure of agent compensation arrangements with insurers were dismissed by the president of a national independent agents group as a "bunch of hooey."

Speaking to agents on Friday during the Independent Agents & Brokers of America's annual Legislative Convention and Conference meeting, Alex Soto, president of the association said the association has dedicated much time and effort to defending independent agent's incentive compensation and profit sharing arrangements with carriers.

"Incentive compensation is proper, is legal, and it is used in every facet of commerce in the United States rewarding excellence," said Mr. Soto. "It is part of an American tradition."

He said the incentives help both customers and companies to reduce risk exposures, underwrite those exposures properly, and help companies make a profit on underwriting risks.

Mr. Soto said he had no problem with sharing information about his compensation with clients, but felt the drive by some companies to disclose the information was going to the extreme.

He said if companies wish to disclose compensation information, they should also disclose how much of the premium dollar is spent on the carrier's business, including a breakdown of executive's compensation.

"In that context, include in a generic sense what we get paid," said Mr. Soto. "The fact of the matter is- that's a whole bunch of hooey."

He said what interests clients is the bottom line of cost, the quality of the carrier, and the service they receive. If the customer does not like the result, he continued, they can go to another agent.

"You and I have to be the best we can be everyday in order to retain our clients," he said.

On other subjects, Mr. Soto defended McCarran-Ferguson, saying revoking it would have a damaging effect on the industry, especially smaller companies.

He said reform is needed of the industry to provide speed to market for products, but an optional federal charter is not the answer. Mr. Soto said it would lead to confusion for consumers and mandatory federal control of the industry.

"A federal insurance czar will not be nimble, will not be able to respond to you when you have appeals, as you do now to insurance commissioners on behalf of your clients," observed Mr. Soto. "Regulation closer to home is the best regulation."

He said the association calls for targeted federal mandates that continue state regulation.

To deal with natural disasters, he said, the premiums for state and federal programs need to be actuarially sound. Not doing so means the rest of the country pays to subsidize the risks, and that would ultimately create a backlash to the programs.

Mr. Soto also called for more policyholders to be brought into the national flood program by exploring the possibility of bringing flood insurance back into homeowners insurance policies.

He touched on the association's campaign to promote Real Time interface, a software programming feature that allows agencies to access carriers through their agency management systems using a single log-on. They can then perform all business made available to them by the carriers through the single log-on.