The latest issue of BestWeek, published by A.M. Best, concludes that reports of the death of contingent commissions are greatly exaggerated. Here is an excerpt from the article:

“Is the contingent commission model in its last throes as some suggest? Not any time soon.
Nearly three years after former New York state Attorney General Eliot Spitzer launched his investigation into broker compensation practices, the insurance industry is no closer to a resolution on the issue. Despite individual agreements by major insurers to eliminate contingent commissions, the industry remains sharply divided between those that want nothing to do with the current system and those that can’t exist without it.”

“While several large companies have adopted new business strategies under regulatory pressure, the majority of insurers and brokers are staying the course and defending what they deem to be a perfectly legal practice…a vast majority of insurers, both national and regional players, as well as mid-tier and small brokerage firms and many independent agents that are still, respectively, paying and accepting contingent fees. Carrying the banner for those who support the current system is Wells Fargo’s insurance brokerage arm, Acordia, which is fiercely defending contingent commissions and has vowed to fight lawsuits filed by attorneys general in New York, Connecticut and Illinois…”

Is the Contingent Commission Model Dead? (BestWeek 1/15/07)

January 17, 2007