Connecticut Attorney General Richard Blumenthal said he expects contingent compensation bans will be contagious in the industryeventually ending the pay-to-play culture altogether No matter how unjust for innocent independent agents, I'm afraid he might be correct.
Riding high as one carrier after another jumps on the fee reform bandwagon following deals struck with state prosecutors, Mr. Blumenthal says that agreements settling bid-rigging and steering charges are setting the stage for an historic change in how the insurance world does business.
He added that ending contingent commissions, and replacing them with fully disclosed fixed commissions, would be good for both insurers and consumers, contending that less money spent by insurers to market their insurance through contingent commissions will mean lower insurance rates for consumers.
While he may be correct that contingency fees are doomed, I have my doubts about whether this will really mean lower costs for buyers. After all, despite the mega-brokers–Marsh, Aon, Willis and Gallagher–giving up such bonus deals in their settlement agreements, risk managers are still crying, 'Show Me The Money!' There is no evidence the savings are being passed onto consumers.
Yes, the market is softening, but that's because loss experience has improved and underwriters are doing a better job pricing risks, not because a couple of billion in contingency fees have been taken off the table.
What do you think?
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