“In response to regulatory matters and settlement agreements, many brokers pledged to refuse to accept placement fees from insurers on business where they represent the buyer,” RIMS said in a recent public statement. “RIMS applauded this action and supported the prohibition on the use of placement service agreements or other similar arrangements for the entire broker industry….We are disappointed to learn that some brokers are apparently reconsidering their pledge to refuse to accept these fees.”
RIMS said it recognized contingent commissions are currently paid on agency-generated business when the agent represents the insurer, not the buyer. “Such practices have always existed in the insurance markets,” RIMS says. “However, for brokers and independent agents to accept these fees in transactions that are made on behalf of the buyer represents an inherent conflict of interest.”
“RIMS has firmly staked out a position against productivity,” PIA executive vice president and CEO Len Brevik has stated. “Incentive compensation is not a conflict, as RIMS is saying. “The ability of businesses to compensate based upon sales performance is key to how the entire American system of free enterprise operates, not just the insurance industry. Companies must be free to structure their compensation systems in the best manner to achieve their goals, without interference from the government.”
Brevik also stated that the PIA would continue to strongly support the right of insurance companies to pay contingent commissions and the right of PIA members to receive them. “The members of RIMS would be better off sticking to risk management, rather than suggesting new ways to make our free enterprise system less enterprising, and less free,” he said.
RIMS (Risk and Insurance Management Society) is the nation’s largest association of commercial insurance buyers.