The Society put its case forward for the elimination of certain broker compensation arrangements at a hearing in New York
The Risk and Insurance Management Society (RIMS) has called upon the insurance industry to eliminate certain broker compensation arrangements at a public hearing in New York City.
Janice Ochenkowski, ARM, RIMS president and managing director at Jones Lang LaSalle, said in her testimony: 'RIMS has for some time maintained that the relationship between brokers and insurance consumers should be governed by the principle of complete transparency.’
‘We believe that a contingent fee system creates an inherent conflict of interest. The best way to level the playing field is to eliminate such compensation arrangements,’ she added.
In her testimony on behalf of RIMS to New York Superintendent of Insurance Eric Dinallo and New York Attorney General Andrew Cuomo, Ochenkowski stressed that RIMS position is a broad prohibition on contingent fees for insurance producers.
However, should the New York Department of Insurance and Attorney General choose not to endorse this approach, RIMS believes that all compensation arrangements should be fully disclosed in writing.
Stated Ochenkowski: “The relationship between the broker and the commercial consumer must be based on a foundation of trust, truth and honesty. Complete disclosure of all compensation arrangements is not the perfect solution, but it will go a long way to promoting transparency, reestablishing the trust between the broker and the customer, and providing customers with sufficient information to evaluate any potential conflicts of interest in the placement of insurance policies.”
In May 2007, RIMS issued a position statement in which it expressed support for brokers who refused to accept placement fees and requested a prohibition on placement service agreements and contingent compensation arrangements. The Society requested that all sources of compensation, direct and indirect, should be disclosed to clients without their request.