Insurance agents challenge RIMS on contingent commissions

The National Association of Professional Insurance Agents (PIA) in the United States has criticized a statement issued by the Risk and Insurance Management Society (RIMS), saying the groups position on incentive compensation undermines the free enterprise system.
RIMS, the nations largest association of commercial insurance buyers, earlier issued a public statement saying it was disappointed to learn some insurance brokers were reconsidering their pledge to refuse to accept certain forms of contingency fee arrangements with insurers.
In response to regulatory matters and settlement agreements, many brokers pledged to refuse to accept placement fees from insurers on business where they represent the buyer, RIMS said in a recent public statement. RIMS applauded this action and supported the prohibition on the use of placement service agreements or other similar arrangements for the entire broker industry.
“We are disappointed to learn that some brokers are apparently reconsidering their pledge to refuse to accept these fees.
RIMS said it recognized contingent commissions are currently paid on agency-generated business when the agent represents the insurer, not the buyer. Such practices have always existed in the insurance markets, RIMS says. However, for brokers and independent agents to accept these fees in transactions that are made on behalf of the buyer represents an inherent conflict of interest.
RIMS has firmly staked out a position against productivity, PIA executive vice president and CEO Len Brevik responded in a press release posted on PIAs Web site. Incentive compensation is not a conflict, as RIMS is saying.
The ability of businesses to compensate based upon sales performance is key to how the entire American system of free enterprise operates, not just the insurance industry. Companies must be free to structure their compensation systems in the best manner to achieve their goals, without interference from the government.
Brevik added PIA would continue to strongly support the right of insurance companies to pay contingent commissions and the right of PIA members to receive them. The members of RIMS would be better off sticking to risk management, rather than suggesting new ways to make our free enterprise system less enterprising, and less free, he said.
Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses.