RIMS calls on New York regulators to prohibit contingency fees

Rather than re-considering the use of contingency fee arrangements, the insurance industry should instead be eliminating them, the Risk and Insurance Management Society (RIMS) has testified at a public hearing in New York City.
The hearings, before New York superintendent of insurance Eric Dinallo and New York attorney general Andrew Cuomo, have been designed to get the views of all interested parties on the proposed addition of a new regulation governing broker compensation and disclosure.
RIMS president Janice Ochenkowski reiterated at the hearing RIMS’ longstanding position that the relationship between brokers and insurance consumers should be governed by the principle of complete transparency.
“We believe a contingent fee system creates an inherent conflict of interest,” Ochenkowski said during her testimony. “The best way to level the playing field is to eliminate such compensation arrangements.”
In the absence of a complete prohibition on contingent fees for insurance producers, Ochenkowski said, all compensation arrangements should be fully disclosed in writing.
“Complete disclosure of all compensation arrangements is not the perfect solution, but it will go a long way to promoting transparency, re-establishing 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,” Ochenkowski said.