Related: Read the article “Government Has No Business Dictating Against Compensation” by Eli Lehrer.

IIABA reports that customers rarely ask agents about contingent commissions. “It is just not an issue that comes up,” Bissett said. “It is almost impossible to find an agent, even within New York, who has been asked for that information.” Bissett surmised that in other states, where the issue has received far less attention, consumer information requests are probably even less frequent.

Other than inquiries about a recent golf trip funded by the state-chartered workers' compensation insurance company, Dave Adams, vice president of Denver-based ISU Insurance Services of Colorado, observed that consumers have little to no interest in the nuances of producer compensation. “I have been asked probably once this year.”

Houldin, who specializes in serving high net worth individuals, said the issue went “unnoticed” by his clients. After several years of belt tightening and aggressive price shopping, he said consumers' lack of interest in contingent commissions sends a strong message: “I think it is very telling that the consumer doesn't care, because that consumer is turning every rock over to try to find savings.”

Agents report most clients who ask about compensation are either interested in how agents make money (e.g., if it is part of the quoted premium or if there is an additional fee) or are simply followers of the financial world indulging their curiosity. “We have never really had it be an issue out here in Colorado,” Adams said. “Occasionally we would get, 'Hey what's going on with AIG?' or 'What's going on with Marsh?' and things like that, and we would explain, but that is usually a very sophisticated buyer, a person who is keeping up on the Wall Street Journal rather than the Denver Post.”

According to Todd Jones, president of Willis North America, some clients are still surprised by the subject. In general, he is seeing increasing awareness at the consumer level. “I would say that more and more of our clients are becoming educated on the subject and understanding what we believe are the inherent conflicts.” For its part, Willis alone among the Big Three has refused to resume accepting contingents, even though the settlement banning them from the practice has been reversed. Instead, it has undertaken a campaign, Clients Before Contingents, which outlines Willis' position that contingent commissions are a conflict of interest in retail insurance.

Related: Read the Mark Ruquet article “Insurers, Brokers Settle 2004 Bid-Rigging Suit”.

Seasoned risk managers are generally more knowledgeable about producer compensation than average consumers, but Adams said that even they are “not really interested with it at all either,” adding, “they are smart enough to know that all agencies have some type of contingent commissions in place, most likely, for hitting their goals or whatever it may be with a carrier.”

Subsequent state investigations fizzled because, as Bissett said, “there weren't any problems ultimately identified.” Despite the press attention, consumers did not connect the Spitzer bid-rigging investigation to the actions of their own Main Street brokers. “There was nothing that they heard that was negative about their agents,” Bissett said, “and there was no need to change the way in which they purchased insurance.”

Many within the industry today see the investigations as only a memory. “The issue of contingent commissions that was raised during the Spitzer era has receded into history,” said Ted Besesparis, senior vice president of communications at the National Assn. of Professional Insurance Agents and AA&B advisory board member. “Fortunately, the attempts by Spitzer and others to tarnish the reputations of those who did nothing wrong were ultimately not successful.”

Rather than facilitating deception and wrongdoing, agents describe incentive programs as vital to maintaining a robust environment that's competitive and fair. Houldin said of the Main Street agencies, “The contingent commission contracts that we have I think are very healthy. I think that they are making sure that we write profitable business, that we stay hungry in the marketplace.”

Besesparis agrees. “The insurance industry pays up-front commissions and year-end bonuses [contingent commissions] in the same way as other industries do. Contingent commissions are both legal and ethical.”

The level of consumer interest seems to have remained relatively static. “We have not seen any evidence that consumers are all of a sudden more interested in what agents make than they were 10, 20, 30 years ago,” Bissett said. “What we find is that consumers care about what they have always cared about: Is the total price appropriate? Is it a sound policy with proper terms and conditions? Is the company a highly rated company? What's its history of claims payment? Those are the issues that consumers have cared about in the past, and those are the things that we hear consumers continue to care about.”

Disclosure then and now

Houldin said his agency doesn't offer compensation information unless a customer asks for it, although most customers receive disclosure as part of the insurance companies' policies. “We do not disclose for the simple reason that we do not think the consumer really cares,” Houldin said. “It is just another piece of paper that has to be produced and shown to them. But certainly, when asked, we give full disclosure and we are happy to. And if I was being asked 60 percent of the time, then I would probably make a business decision to just proactively tell them.”

Other agencies, such as Adams', offer the same disclosure they always have, where consumers interested in more information are invited to inquire further. “Most of them do not even pay attention,” Adams said. “We tell them, 'Hey, it just means that we are not going to place your business just to make sure we get a bonus. We are placing you exactly where you fit in the insurance market.'” He said after that, consumers are ready to move on.

Related: Read the article “N.Y. AG Withdraws Charges Against Marsh Execs” by Mark E. Ruquet

Only New York has a comprehensive, across-the-board disclosure requirement, and “even in New York, you are not required to disclose your actual compensation,” Bissett said. “You only have to disclose that you are compensated and that if you, as a consumer, want more information, you have the ability to request it.” The IIABA said that New York's disclosure requirement “was not a measure that was considered by the legislature, and we are challenging what the department did there because we do not think they had the proper legislative authority to do it.”

Disclosure mandates spark worries that consumers will begin to place more importance on producer compensation than is warranted, while making business processes more onerous for agents and consumers alike. “If you mandate this sort of heavy-handed disclosure, are we telling consumers to focus on that when it is not—it should not be—the focus of what they are looking at anyway?” Bissett said. “I think that is the concern that we have.” He said across-the-board disclosure mandates are not justified from a cost-benefit perspective. “It is a lot of work for agents and hardly any value for consumers at the end of the day.” Instead, agents recommend that consumers focus on the quality of the policy and the company behind it.

The (quiet) road ahead

The crystal ball shows little on the horizon for disclosure mandates. “What we see is this has been a very quiet, almost dormant issue for five years now, with the exception of New York,” Bissett said. “There is no indication or suggestion that other states are considering similar actions. I work with all the states, and I do not know of a single state that is contemplating enacting some sort of measure that addresses contingent commissions or disclosure in any way.”

When asked about what the future of disclosure mandates might look like, Houldin was circumspect. “I think it is a bigger issue inside the industry than outside the industry,” he said. “I am a firm believer that we should have transparency and disclosure, but I also do not think we should be creating burden and wasting paper to deliver something that the consumer does not really care about. I think we need to be completely transparent when asked and I think we need to certainly encourage the conversation, but to have me send out a disclosure notice when the consumer does not really want to receive it, I do not think is a sensible solution to anything.”

“I do not know, from a regulatory perspective, where things are heading,” Jones said. “I do think that we will continue to see pressure for full transparency, full disclosure of revenue streams and how people are getting paid.”

“I think you will continue to see the competitive environment play itself out,” Bissett said. “Consumers who want to know more about how an agent is compensated will ask. If there are agencies or brokerage firms that think they can get a competitive advantage by not receiving contingent commissions, they will alter their structures.” If legislators and public policy makers continue to allow the marketplace to function without interference, the competitive nature of the industry will likely offer sufficient protection against improper or anti-consumer activity.

Many, including Besesparis, believe the government should not be involved in determining how producers are compensated, just as there is little to no intervention in the pay structures of other professions. “How insurance producers or anyone else is paid is a business decision; it is not something to be determined by government bureaucrats,” Besesparis said.

For all the attention paid to incentive compensation structures at the height of the investigations, agents aren't worrying about commissions falling by the wayside. Houldin said that eliminating bonuses would cause a shift in agent compensation resulting in little net difference from the current structure.

“What it would cause to happen, I am very confident, is that the insurance companies would just simply have to raise commissions.” Houldin believes today's increased financial pressures give carriers little choice. “I am confident, because they have to. They know that we cannot survive. There are agencies right now, a very high percentage, that are barely staying afloat as it is. If you take away that income, they are going to sink.”