Much ado about little
Profit sharing is here to stay and compensation disclosure, if any, should be left up to agents and brokers to decide.
Judging from comments at a recent Independent Insurance Agents and Brokers of New Hampshire meeting, the compensation issue has not only faded from public view but it never bothered most insurance customers in the first place.
“Profit sharing will continue to be important to us in the marketplace… We intend to maintain that program with our agents,” proclaimed Michael Christiansen, New England regional president, Hanover Insurance.
Vermont Mutual’s Tom Tierney described profit sharing as a matter that is between the company and the agency: “I think it’s a relationship that’s built on trust, and the agent is our first line of underwriting. Obviously, some of you do it much better than others. You should be compensated for that. I don’t see anything in the future changing that model at all.”
Concord Group’s Linda Day endorsed contingencies by likening the personal lines agents representing her company to sales people in other industries. “”Brokers are paid by either or both the consumer that they’re representing and the company, and I think they do need to disclose when they may have a conflict of interest. But as far as independent agents, they’re doing their job, they’re getting paid to do the job, and if they do it really well, they should receive a bonus, the same way as we would as employees or in other industries,” Days aid.
Regulators acknowledged that the issue of whether contingencies should be paid has lost its urgency and even related questions of compensation disclosure have cooled.
New Hampshire Insurance Commissioner Roger Sevigny made it clear he is accepting of contingent payments. “I’ve been in the business a long time and contingent commissions have been the way of life for as long as I’ve been in the business, and I’ve accepted it. I’ve thought it was the way business was done. It’s been done successfully that way.”
Massachusetts Insurance Commissioner Julianne Bowler added that her department has received no complaints at all about contingencies and advised that to the extent contingencies raise disclosure concerns, those should be dealt with by the marketplace. “Disclosure’s always a good thing. But I really think it’s something that the market needs to bring to bear because if it’s left to government, if the market doesn’t solve the problem, and it’s left to government, government is going to do what it always does, which is overreact and be extremely prescriptive,” Bowler stated.
Sevigny echoed Bowler’s caution: “What you don’t want to do as a regulator is overreact and put some constraints in the marketplace that you really don’t believe should be there, but you do it because of certain public reaction. I can tell you we’ve had no public reaction in New Hampshire, either. We have not had complaints that have caused us to look into the matter any more than we looked into it a year or so ago.”
Concord Group’s Day suggested that contingent commissions represent a minor cost, averaging about .08 percent of premium. “So it’s a very small piece of the pie, and I certainly think that we do need not to overreact on disclosure for independent agents,” she added.
All of which says that the brouhaha over profit sharing has been much ado about next to nothing, at least as far as Main Street agents and their customers are concerned.