Insurance premiums afflicting
New York Attorney General Eliot Spitzer radiated contingent commissions for the sale of insurance business, but they seem to be more prevalent in the personal lines of insurance, based on an informal survey.
Some insurance companies - including Mercury General, Fireman’s Fund, Chubb and Hartford - say they pay contingent commissions and independent brokers to distribute their products. These commissions are usually based on a volume of sales agents or profitability of a company.
Other insurers such as Safeco and St. Paul Travelers, refuse to confirm or reject, if they pay commissions, which Spitzer cited in his complaint filed two weeks, denounced “widespread corruption in the insurance sector.”
Most insurance companies pay agents and brokers a right that the commission is a general rule, a share of premiums. This percentage may go up more volume has an agent to the company.
Consumer advocates and some regulators markets say that this type of quota Commission could lead to direct agents, that most customers with an insurer, even if they are not insurers offer the best offer.
Commissions conditional on the basis of profitability is even more problematic, says Robert Hunter, the Consumer Federation of America’s insurance director.
An agent may have an additional provision of an insurance company, when its customers are rights to less than 50 percent of the premium paid, and an even bigger, if claims are less than 40 percent of premiums .
If an officer close to 40 or 50 per cent for the year and comes with a customer right, agents customers to delay application for registration of the claim or file that is not all. Worse, the agent may say, the loss is not covered.
“Here you have a direct conflict with the consumer in case of violation” of laws of the state, said Hunter.
Spitzer accuses Marsh & McLennan, the largest insurance broker business, received the tariff quota commissions that “were characterized as compensation for ‘market services’ but were, indeed, rewards for companies, Marsh and its independent brokers and headed for insurance companies. ”
Given that the complaint was filed, Marsh McLennan, Aon Corp. and Willis Group Holdings - the nation on the three largest business insurance brokerage - said she stop accepting contingent commissions.
Although Spitzer’s suit revolves around business of insurance, Insurance Commissioner John Garamendi says California is also studying contingent commissions and believes that consumers damage. He refused all the details to his office files a civil action. Garamendi had planned for the suit this week, but now his office, he says the records “in the near future.”
Insurers have pointed out that most insurance business sold by brokers, legal representative of insurance buyers, not insurance companies. They are obliged to its customers the best offer possible.
Most personal insurance is sold directly by insurance companies are offered to consumers, or by “captive” or “exclusive” agents, only one company. These agents can not blame refer clients to a company in another, but they could be a motivation to keep, if it seeks to secure a profit-based incentives, Hunter said.
The other third of the house and car are sold political agents and independent brokers, represented several companies. Representative, as “agent” legally, insurance companies. Those who, as a “broker” represent clients. But customers do not always know the difference.
“When it comes to insurance, most consumers have a strange mixture of fear and boredom. They are an agent and say:” Take me, I am you, “said Hunter.
Robert Hartwig, chief economist at the Insurance Information Institute, a trade group of non-life insurance, said: “It is not uncommon that some insurers to offer incentives tariff quota for certain performance indicators are met. ”
For example, the insurer may offer a bonus to the agent to increase their business year, but only if it is profitable.
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