The large majority of corporate insurance buyers dont believe their firms have benefited from the fact that major brokers stopped accepting contingency fees following probes into bid-rigging and account steering by then New York attorney general (now governor) Eliot Spitzer and others, a National Underwriter survey revealed. With the mega-brokers having sworn off the now disgraced volume-based bonus commissions, where did all those billions go?
Fifty-six percent of the 132 risk managers surveyed believe the money saved by eliminating contingency commissions is being retained by insurers, compared to only 7 percent who say the savings are being passed on to them in the form of lower premiums.
More than one-in-three simply dont know where that bonus money went, according to NU's "State of the Market" survey, sponsored by Miller--an independent, specialist, wholesale insurance and reinsurance broker based in London, operating internationally as well as at Lloyd's.
Nonbuyers surveyedmost operating directly within the insurance industryexpressed similar doubts, with nearly two-thirds responding that the money saved was being retained by carriers, and only 4 percent seeing buyers enjoying the benefit. One-third dont know where those funds went.
In phone interviews with survey respondents, risk managers were often negative when asked whether they felt they now get better value from their broker since Mr. Spitzers probe. A few complained about new broker compensation disclosure policies creating unnecessary complications and paperwork, with one stating they are not getting good value in exchange.
However, some responded very enthusiastically. One said that post-Spitzer, insurers are more concerned in terms of proving value and providing appropriate policies. Another said theres more pressure on brokers to get a better price. Ive been able to take advantage of that.
Where do you all think that money went? Into the pockets of carriers? Or is it helping fuel the softening market?
And what about carrier efforts to find some alternative to the discarded contingency fees? What form of bonus compensation might pass muster and get the job done?
(For a more comprehensive story on the survey results, click here. And for additional in-depth analysis, write Miller for their report at [email protected].)
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