Summary
The controversy of contingent commissions is not a new one. This debate has caused significant changes to our views of broker payments, disclosure, ethics, and loyalty. The central question started off as being one about disclosure. Theoretically, if the client is aware then there isn't an issue. If this article is any indication, the debate is far from over. Aon, Marsh, Willis Group and Arthur J. Gallagher have all dealt with repercussions from investigations. Even though full disclosure is now a standard business practice, the question still remains.
Analysis
The role of a broker is complex. As such, it deserves compensation in all areas of service. Contingent commissions, or forms of such commissions traditionally are viewed negatively. I'm not certain why exactly. A broker working in the role of advisor is compensated fairly for that service. That same broker places a carrier into position and is compensated with commissions. Carriers build incentive programs into their marketing allowances. Contingent commissions are builtin incentives and come in many forms. They vary from cash awards to travel to advertising contributions, etc...From my experience all incentives are "if-then" propositions. "IF" something happens, "THEN" something else happens in return. IF a broker hits certain targets set by an insurer, shouldn't they THEN be properly compensated in all ways available to them? As long as that broker can demonstrate that this is the best possible advice they are delivering to their client, why is it a conflict of interest? Incentives are not illegal. Incentives have never been illegal. Whenever this issue comes up, I feel as if we are looking for ways to restrict, ways to control and limit our industry. Why is that?
