RIMS wants contingent commissions re-think

The US insurance buyers’ group the Risk and Insurance Management Society (RIMS) is dismayed that the New York Insurance Department and Attorney General will allow Aon, Marsh, and Willis to accept contingent commissions.

“Without strong consumer protections in place, RIMS has strong reservations about a policy that permits contingent commissions again, and this development illustrates why RIMS so vigorously fought for a stronger rule,” it said.

Scott Clark, director of RIMS External Affairs Committee and risk and benefits officer for Miami-Dade County Public Schools, said: “When Arthur J. Gallagher and Company was released from its agreement in Illinois in 2009, RIMS expected that New York would shortly follow suit.”

Full disclosure

“RIMS had hoped that in the absence of a contingent commission ban, brokers would be required to provide full compensation disclosure, allowing the consumer to decide whether the broker is acting in their best interest.”

“Unfortunately, the final regulation does not live up to that standard, and instead the burden to request full disclosure has been placed squarely on the consumer.”

RIMS urged Aon, Marsh, and Willis to commit to full compensation disclosure above and beyond the recent NYID regulation

Revisit and consult

RIMS demanded that the New York Insurance Department revisit its producer compensation regulation, and open it up to another comment period following the most recent changes.

RIMS also asked other states to go further with their regulation and make a strong effort to enact full mandatory disclosure requirements that will protect the insurance consumer.

Elliot Spitzer

Bloomberg reported that Eliot Spitzer, the former New York attorney general whose 2005 curbs on insurance-broker compensation were reversed by this week, said the fees that he banned “created inherent conflicts.”

“The contingent commissions created inherent conflicts and tensions that led to improper practices that we were trying to eliminate,” Spitzer said. “It was part of a larger reform effort to protect consumers and ensure the integrity of the marketplace.”

In 2004, Spitzer called some contingent commissions “classic cartel behaviour.”