The dean of insurance news reporters and analysts, Emanuel Levy of Rough Notes, has another excellent article on the subject of contingent commissions in the March issue of the magazine. The article is entitled Collateral Chaos: Bid Rigging Scandal Threatens Legitimate Contingent Commission Practice.  In it, Levy notes that in the push by several state Attorneys General to ban contingent commissions, “They [AGs] failed to clearly distinguish the ‘bid rigging’ customer allocation (steering) of risks, a quid pro quo device by mega producers who were who were double-dipping, from the profit-sharing contracts that have never before been challenged by regulators, other agencies of government or the public.”

“The demand for this action of the AGs introduces a new element of oversight, and its success may enable the intrusion of this extra-regulatory process into legitimate business enterprises without the color of law,” Levy wrote. “The AGs of course have all the authority and obligation to investigate and punish fraud and other improprieties, but not to go beyond and upset legitimate business practices.”

“That was clearly stated in the midst of the debate by Len Brevik, executive vice president and CEO of the National Association of Professional Insurance Agents,” Levy continued. “Referring to one of the strong-armed settlements by New York, Connecticut and Illinois involving Zurich, Brevik said: ‘Regrettably, this settlement agreement, and others like it, attempts to create a remedy for alleged wrongdoing and then impose it on those who were not involved in any wrongdoing.’ Levy then notes that the agent industry has shown solidarity on this issue and advises them to “stand firm to protect the integrity of its compensation.”

Bid Rigging Scandal Threatens Legitimate Contingent Commission Practice
(Rough Notes 3/07)

March 13, 2007