Long Live Commissions

Commercial insurance brokers deserve everything they can get their hands on--either in the form of fees or in the form of a commission or both. This isn't about greed. It's about incentive, and it helps brokers work harder for their clients.

It's true that there isn't a poor broker out there. Brokers who've made it this far have by now become adept at making money, not only when prices are on the way up but also when prices are on the way down as they are now.

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But before risk managers dwell on how much more financially successful they might have been had they chosen the broker instead of the buyer route, remember that brokers spend a lot of money as well, and they often spend it on their clients in markets hard and soft.

Who could fault Willis' John Bullock for taking out his casino industry clients for a spin in his sport fishing boat in the azure waters of the Gulf? Those expenses are coming out of brokers' pockets, thank you very much.

Honest brokers, who are supposed to fight for the interests of their clients, should be disclosing the source of their fees and commissions. If they don't, risk managers should demand that they do. If they still refuse, they ought to be shown the door.

So long as buyers know how their broker is being compensated, who cares whether the money's coming in the form of a fee or a commission, or both, or from the client and the carrier, or both.

Risk managers--a fairly successful breed themselves by any account--who object to their broker's compensation structure can hunt down another broker, or switch to the other side and become a broker themselves.

CYRIL TUOHY is managing editor of Risk & Insurance®.

February 14, 2008

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