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The issue of contingency fee arrangements has become larger, following a speech by the Willis Group CEO.
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Speaking in Philadelphia at the annual conference of the Risk and Insurance Management Society, Joseph Plumeri, CEO of Willis Group, said that "contingent commissions are inconsistent with client advocacy and unacceptable" for insurers to pay and agents and brokers to accept. "We should abolish contingent commissions throughout the industry," declared Plumeri, whose own firm has done that.
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At a press conference following his speech, Plumeri urged RIMS to come out against contingencies and said it should not matter whether the agent or broker is global or local. "Why is it that it is bad for global brokers but not for the independent agent in Peekskill?" he asked, maintaining that the issue of conflict is the same, the difference is merely one of degree.
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An end to contingencies was one facet of a new business model Plumeri urged for the industry. He called for transparency in transactions and compensation, more efficient policy issuance and claims service, and a bigger industry investment in technology.
business insurance bethlehem pennsylvania But most of all, he said, the industry must have a "passion for what are the client's best interests, all of the time, not just at sale or renewal."
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Quick Response Palmeri’s comments drew quick response from around the industry as The National Association of Professional Insurance Agents reiterated its support of contingent commissions being a part of the compensation received by Main Street professional insurance agents. The affirmation was in direct response to an assertion made by Joseph Plumeri, CEO of Willis Group, who said at Risk and Insurance Management Society (RIMS) annual conference that contingent commissions should be abolished throughout the insurance industry -- for mega-brokerages as well as retail independent agents.
"This is a hypocritical suggestion, in that it comes from the CEO of the nation's third-largest insurance broker - a firm that earlier this month agreed to pay $51 million in restitution to policyholders to resolve concerns about anticompetitive practices involving incentive fees in property and casualty insurance sales," said Leonard Brevik, executive vice president and CEO of PIA National. "The timing of Mr. Plumeri's comments makes them particularly dubious." The settlement resulted from an investigation conducted by New York Attorney General Eliot Spitzer and Minnesota Attorney General Mike Hatch.
"This is another indication of people talking about the insurance industry in broad terms without having a complete understanding of all the issues involved," Brevik said. "One mega-broker's experience should not be extended to pontifications regarding the entire industry." Brevik noted that even New York's Attorney General has clarified his position to distinguish between mega-brokers and Main Street agents. In a speech to the National Press Club on January 31, 2005, Spitzer said contingent commissions "may be appropriate...I don't want to say they should be banned industry wide." CIAB Defends Plumeri Leaping to Mr. Plumeri's defense was the Washington-based Council of Insurance Agents & Brokers (CIAB) President Ken A. Crerar.
“We take issue with PIA's attack on a prominent leader in the brokerage business. Inflammatory words such as "dubious” and “hypocritical” are wrong and misguided," declared Mr. Crerar.
He said his organization, "will never attempt to dictate a business model to its member firms or the broader industry. Persons of goodwill may have honest disagreements about