A View From The Press Box

If New York feels that brokers and agents must tell an insured the commission and profit sharing dollars for a policy, then New York should also require it of car dealers--they also get incentives.

While they are at it, most product manufacturers and major distributors/wholesalers also give incentives. So every business in New York should be on the same level playing field.

Just think of the added pressure that will be directed at the broker/agent to kick back some of the commisison to the GREEDY insured who now knows what is paid.

I can see the gecko and cavemen now saying: "Why give a broker/agent commission? We don't pay commissions."

I have no problem letting the general public and clients know in what form I am being compensated. I do, however, take exception to a rule requiring me to let them know how much I'm being paid.

In every aspect of the workforce, one of the biggest no-no's you can commit is to discuss with someone how much you are being compensated.

Here we are now with this "pink elephant," and regulators want retail agents to disclose to clients exactly how much they are being compensated. Does this now open me up to the future loss of clients because perhaps I earn an extra 2 points over Joe Smith down the street? Or perhaps earn a bonus for writing good, profitable business for one of my companies?

With so many percentage-based commission-paid jobs in the marketplace, I would like to think we could at least be placed on an even playing field.

I know two of the most expensive things I currently pay for are my mortgage and my prescription medications. But do any of us really believe that our real estate agents or pharmaceutical reps are going to have to disclose their income any time soon?

It makes me wonder if we should be looking toward a time when all compensation is out in the open, and now your contracted companies are sending you AOR requests because the client asked Joe Smith to lower his commission percentage by half, and he agreed in order to write the business.

I don't see anything good for the agents coming from this. But since when has anyone besides ourselves been interested in what happens to us?

"But on the retail end, why shouldn't consumers know what their agent or broker is paid and how? If agents have nothing to hide, they shouldn't have anything to be afraid of."

What difference does the amount of money my agency grosses have to do with the perceived value of the insurance?

Is an antique a better buy if the price is $1,000 and the dealer only makes $100 instead of $200? The bottom line price is the same.

Do we need to disclose our costs, too? "Yeah, sure I grossed $1,000 on your account, but it costs my agency $160 for MVRs, $300 worth of CSR time, $10 for postage, $3.79 pro rata share of heating & cooling, ad nauseum..."

Somehow, I believe the insurance buying public knows that agents and brokers are in business to make money. We are NOT a public right or accomodation; we are a business. And, we are entitled to make money.

Maybe our insureds should be required to tell us how they spend the money they earn. We need to be certain that they have the dollars to pay their premiums.

Maybe the New York State officials should just tell the cheaters to stop and let the rest of us do our jobs.

Bill makes a great point about car dealers, and other industries that do not disclose what their sales people make. I personally think this is one of worst things for our industry.

Let's carry this forward to include all industries and occupations. Every restaurant owner should have to dislcose how much they make on each item--after all, they could be getting a deal on chicken and not passing it on to consumers. They should also post how much the empolyees are making.

Law firms tell us how much they bill per hour, but we should know what each lawyer is making personally, should we not?

Any sales occupation should be expected to do the same. After all, they may get an incentive to sell something the customer already wanted, and God forbid make a little extra money for doing a great job.

Because some companies and people were rigging bids, the answer is not to mandate disclosure of how much a broker or agent is making. The answer is, in my opinion, is dislcose all the bids and to ensure they are accurate.

Independent agents and brokers state one of the reasons to go with them is they have multiple companies to compare to get the best policy for the buyer. Why not show all the quotes?

By the way, Sam, do you want to disclose how much you and the staff of National Underwriter make? After all, you might be making too much money!

SAM RESPONDS:

You make some interesting points, Dave, but one you did not make is that just providing a list of quotes does not assure the client is getting the best deal. What if the company offering the lowest bid is also the slowest on settling claims, or the most litigious? And what if the lowest bid comes from a company with a low rating on claims-paying ability? The producer needs to present the entire package.

However, what an owner or employees are paid in non-financial industries--including journalism--really has no relevance to the service provided, in my view.

With financial services, on the other hand, who pays what can play a big role. If an agent is one $10,000 account away from triggering that $1 million contingency fee bonus mark, that is a powerful motive to place a client there regardless of what's best for the client. Indeed, the presence of the bonus at all skews the relationship.

I would feel most comfortable if the agent just took a straight commission, period. In the case of big commercial buyers, I would be most comfortable if my broker was only compensated directly by me, not the providers.

A stock broker, for example, is not paid by the companies issuing the stock (with the exception of investment banking firms taking companies public, but that has tons of disclosure attached and regulation over compensation). I would not trust a stockbroker touting the stock of the firm paying him to sell me their stock, would you?

DAVE HAS THE LAST WORD:

Sam, you are correct that the whole package should be presented. I used the wrong phrase when stating the quotes should be presented.

Does not most of this boil down to a question of ethics, a topic discussed in this blog before? If the agent in your example was doing the ethical thing, they would present all the packages. Rules and regulations will never stop unethical people from doing unethical things.

As for the stockbroker touting the stock of a firm paying him to sell the stock there are cases all the time where stockbrokers get in legal and regulatory trouble for doing the wrong things no matter how they are paid.

I just do not think it is a good idea to have to disclose how much an agent or broker is making. I think it will open up Pandora's Box, because the perception of how much someone is making will not reflect the expenses of the agents or brokers and hence the outcry about how much people are paid.

Brokers, large or small, can’t aspire to be trusted advisors and representatives of their clients and at the same time receive hidden compensation from underwriters.

This regulation is long overdue.

Isn't it amazing that the brokers continue to want to hide their commisssion dollars from their insureds and the public? It's a legitimate cost of doing business, so why not be up front about it?

In fact, why not advertise how much you get so that the informed consumer can pick the broker who gives the best service for the fee they charge?

Oh wait, we'd be asking for truth in insurance once again, and that would be an oxymoron, wouldn't it? We'd be asking the broker to do what we constantly accuse the companies of doing, fudging on the truth to the policyholders!

Many brokers and agents do a superb job of serving and servicing their clients and deserve every cent of commisssion they make. Others simply put that money in their pocket and deliver nothing but a policy, if that.

Heck, some can't even be counted on as a decent intermediary to help when you need assistance, yet they still get that commisssion money anyway. And perhaps a trip to the Bahamas or a cruise or other "spiffs" disguised as educational junkets.

I do not disagree that commissions and other forms of profit sharing are the lifeblood of the agency plant, nor do I disagree that some other businesses might also share information on their "mark ups" with the public as well.

Information on automobile mark-ups has long been available through various sources including hold-backs, advertising incentives, factory incentives, invoice procing including center-box vs. other invoice pricing, flooring, etc. Takes some research, but it's there.

Nowhere will you find the same information available for the insurance buyer.