Ssshh! If we just hunker down and be quiet, it'll be ok. It'll blow over. Won't it? In fact, it already has. Hasn't it?
A year and a half after New York's attorney general barred broker compensation and bid-rigging irregularities, this seems to be the prevailing attitude among too many brokers: that was then; this is now.
Today, there's hardly a ground swell for deep disclosure or transparency, except at the uppermost levels. Even discomfort about the whole matter is difficult to detect. Sure, the big three got nailed big time, but others seem to be flying comfortably, even cluelessly, under the radar, apparently secure that Eliot Spitzer's attention span (and that of potential Spitzer clones) is limited.
Spitzer mounted some large heads to the wall of his den (labeled Greenberg and Greenberg) but now he's got other game to shoot and other press releases to pump out as he sniffs the trail to the governor's mansion in Albany. So the thinking seems to go.
But there's evidence to the contrary. Late in March, Zurich Financial Services agreed to pay $171.7 million in a settlement of bid-rigging charges in nine states, on top of $153 million with the attorneys general of New York, Connecticut and Illinois. The month before, American International Group reached a $1.6 billion settlement with the regulators over charges it fraudulently padded its financial results and rigged bids on commercial accounts.
The Spitzer assault on insurance credibility and integrity rates an eight on the industry Richter scale. He amply demonstrated that broker contingent commissions were (as the priests and nuns of my youth would have it) an "occasion of evil," engendering greed and abuse and paving the way to a life of sin. Contingent compensation isn't immoral or illegal per se, of course, but it's clearly not in the best interest of the customer and is to be avoided. All that's been avoided so far, though, is the very subject itself. Why are so many shrugging it off? Why is the industry so sensitive, secretive and defensive on the issue?
TRADE GROUPS SILENT
Take the leading producer trade associations. Their sound bites on the matter are rife with platitudes and generalities.
The Independent Insurance Agents & Brokers of America decries bid rigging, preaches the benefits of traditional incentive commissions, and says little else. The Council of Insurance Agents & Brokers is foursquare on a uniform system of transparency, but its policy is otherwise fuzzy. The National Association of Professional Insurance Agents (like the Council) backs reforms urged by the National Conference of Insurance Legislators but it "condemns" a general ban on earned contingency compensation. None of them cares to tell you how many members still engage in the practice.
Most baffling of all are the ludicrous antics of the Risk & Insurance Management Society, ostensibly the leading representative of the nation's commercial insurance community, the group presumably most victimized by the scandal. For the second year running, the feeble leadership of RIMS made a grand show of discussing the subject with insurance carriers and brokers--but it chose to do so in secrecy, behind closed doors, instead of in the full light of day. What's that all about?
Rhetorical question: Is it not high time for all the players to ventilate this key issue openly, truthfully and frankly?
THOMAS J. SLATTERY, a veteran editor and writer on industry affairs for more than 40 years, is also the managing director of Slattery-Esterkamp Communications, Baldwin, N.Y.
May 1, 2006
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