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Government Has No Business Dictating Agent Compensation

Attorneys general, insurance industry executives and self-proclaimed consumer advocates who want to modify compensation for insurance agents and brokers don’t know what they are talking about, according to free-market advocate, Eli Lehrer.

By Eli Lehrer | Updated on April 25, 2011

The government has no business dictating how insurance agents and brokers get paid. Quite simply, attorneys general, insurance-industry executives and self-proclaimed consumer advocates who want to modify compensation for insurance agents and brokers don’t know what they are talking about.

The insurance industry pays upfront commissions and year-end bonuses—also called contingent commissions—in about the same way as other industries do. Judged by its practical applications and consequences for consumers, this combination of commission types does a good job aligning the interests of those who sell insurance and those who buy it.

Some basics on the controversy first: One can buy insurance through either an agent or a broker. Both agents and brokers pass similar exams, provide advice and guidance about insurance purchases, and help match consumers with insurers. But they get paid differently.

Agents are always paid directly by insurers, while brokers typically get paid by their customers. Sometimes, however, brokers collect commissions from insurers in much the same way that agents do.

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