NU Online News Service, April 29, 10:50 a.m. EST
BOSTON–Risk and Insurance Management Society President Terry Fleming urged RIMS members not to agree to pay contingent commissions to insurance brokers.
Mr. Fleming spoke at a press conference at the group's annual conference here. In his remarks he also said the past year-and-a-half of recession has highlighted problems spotlighting the work of risk managers.
"Risk management has changed significantly since that time," Mr. Fleming, said, noting that the risk management model used by the financial industry "didn't work."
Scott Clark, government affairs board liaison, addressing the issue of contingent commissions for brokers, said the organization is not comfortable with the New York Insurance Department's broker compensation disclosure rule that he said will put the burden of broker transparency on the consumer.
Under the new department regulations, due to take effect Jan. 1, 2011, producers will be required to describe to consumers their role in the transaction and how they get paid, but a more detailed statement about compensation would only have to be provided if the client requests it. Two agent groups have said they will challenge the rule in court because it is too burdensome.
RIMS advocates for prohibition of contingency fees and absent that, full transparency on a mandatory basis, he explained.
Mr. Fleming said that most sophisticated risk managers have arrangements with their broker. "Mine receives a flat fee," he said. "If they do receive a commission they have to reduce my fee."
He also observed that while many risk managers of larger organizations have a similar arrangement, some of "the mid and smaller risk managers may be insurance buyers, or serve part time and are not aware of contingency fees."
Mr. Fleming also called on risk managers to "walk the talk," and put into action a call for an end to contingent arrangements with their broker. "I walk the talk," he said. "I go with brokers who don't accept contingent payments."
Mr. Clark said some risk managers may need to acquire the skill set to learn the nuances of broker compensations.
In her report about the annual conference, RIMS Executive Director Mary Roth said this year's registration was up 20 percent over last year's conference, which took place in Orlando.
This year RIMS had 4,700 conference registrants and 3,929 exhibitors, adding to a total of 8,629 attendees. This number, she said, does not include on-site registrants.
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