Past PIANY President Bailey Testfies at Second Compensation Hearing
Professional Insurance Agents of New York State Inc. past President John W. Bailey, CIC, of the George Bailey Agency, Dryden, N.Y., testified on behalf of the association at a joint public hearing on producer compensation and disclosure. The hearing was the second in a series of three this month held by the New York State Insurance Department and Attorney General’s office. Bailey, and seven others spoke to the panel, comprised of three representatives from the NYSID and AG’s office each.
Eight individuals testified at the hearing, held in Albany, representing producer and company groups from the property/casualty and life/disability sectors; as well as Mercer Health & Benefits and State Farm.
Bailey was joined by other associations in reiterating PIA’s long-standing position that contingent commissions are legal, effective compensation for producers that benefit New York state’s consumers and economy. He told the panel that, beyond their inherent ethical behavior, a competitive market ensures that agents act in best interests of the consumer.
Pressed by the attorney general about whether contingents are an incentive to agents to steer business, Bailey responded, “There simply is no innate advantage in trying to place business in anything but the most appropriate and competitive market. ... The reality is there are a lot of different types of exposures; and our goal is to bring the best product to our client. It simply doesn’t benefit us in an extremely competitive market, to place business with the wrong carrier.”
Bailey and several testifiers pointed out contingent commissions, paid by insurance companies to retail independent insurance agents, are not the same as “placement service accounts,” which certain mega-brokers used in bid-rigging schemes and which the attorney general investigated and settled in 2004.
Nearly all of the eight speakers spoke in favor of transparency at some level in transactions with clients, however, some, including David Rahill, representing Mercer Health & Benefits LLP, a subsidiary of Marsh & McLennan Cos. Inc., called for a “level playing field,” either by the elimination of contingency agreements across the industry or by altering the settlements that bind certain brokers against such compensation, as a result of the attorney general’s investigations and subsequent agreements in 2004.
PIA testified that voluntary disclosure exists in the market, and that mandating disclosure would mislead consumers, perhaps implying that producers’ compensation is negotiable between the customer and the agent. To the contrary, “our compensation is set by the companies and approved by the insurance department as part of the rate approval process,” Bailey explained.
A third hearing is scheduled to take place Friday, July 25, in New York.
Source: Source: PIANY | Published on July 24, 2008
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