The Risk and Insurance Management Society (RIMS) today 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 Incorporated, testified on behalf of the Society to New York Superintendent of Insurance Eric Dinallo and New York Attorney General Andrew Cuomo.
“RIMS has for some time maintained that the relationship between brokers and insurance consumers should be governed by the principle of complete transparency,” said Ms. Ochenkowski during her testimony. “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.”
In her testimony, Ms. 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, the Society believes that all compensation arrangements should be fully disclosed in writing. “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,” stated Ms. Ochenkowski.
In May 2007, RIMS issued a position statement in response to many brokers reconsidering their pledge to refuse contingent fees on business where they represent the buyer. In that statement, the Society expressed support for brokers who refused to accept placement fees and requested a prohibition on placement service agreements and contingent compensation arrangements. Additionally, the Society requested that all sources of compensation, direct and indirect, should be disclosed to clients without their request.
RIMS looks forward to working with the New York Insurance Department and Attorney General’s office to address the issue of insurance broker compensation and placement services.
Ms. Ochenkowski’s complete testimony can be found here. RIMS May 2007 position statement on contingency fees may be found here. For further information or to arrange an interview with RIMS, please contact Felicia J. Messimer, RIMS communications associate, at (862) 596-2922 or fmessimer@RIMS.org.