Posted on 22 Feb 2010
As we reported last week, Risk and Insurance Management Society (RIMS) criticized an agreement that allows the largest insurance brokers to accept certain insurer-paid commissions and said it will counsel its members to push for fair treatment from brokers.
"If we create a solid front of [RIMS] members that says these are minimum requirements" we will accept, "it will be hard for brokers to say no," said Scott Clark, risk and benefits officer of the Miami-Dade County Public Schools and the secretary of RIMS, a group of around 10,000 professionals involved in risk management for more than 3,500 corporate and government entities.
RIMS has been critical of moves by regulators to allow brokers, who act as middlemen for insurance customers, to accept commissions paid by insurers that are based on business volume or profitability.
Earlier this month, Aon Corp. (AON), Marsh & McLennan Cos. (MMC), and Willis Group Holdings, the largest insurance brokers by revenue, reached an agreement with New York prosecutors and regulators to lift the ban on so-called contingent commissions that was in place since 2005.
The lifting of the ban could boost the brokers' revenues amid toughening competition for business, as insurance prices continue to fall. It likely will also lighten their administrative and compliance burden while ending grumbling that these firms were on an uneven playing field with smaller brokers, which weren't subject to the earlier ban.
The brokers will also have to abide by the terms of New York broker compensation disclosure rules, but RIMS believes the rules are inadequate to protect insurance customers.
Clark said that RIMS will encourage its members to require their brokers to either provide them full fee disclosure early in the broking process or not allow their broker to take contingent commissions at all on the transaction.
Large accounts such as the one he represents "have the leverage in the marketplace to be able to demand that."