By Kenneth R. Auerbach, Esq.
President-elect
PIA National

It just didn’t smell right.  The New York Attorney General was accusing the world’s largest mega-brokers and insurance companies of bid-rigging, fraud and conflicts of interest; and the cause of these misdeeds was supposedly earning contingencies and failing to disclose commissions?  The notion bordered on the bizarre.  I struggled to make sense of it.  I read the press releases and indictments.  Immediately, I saw the twin evils driving the process – confusion and politics.

Attorney Generals and other politicians were confusing (1) agents with brokers; (2) contingency agreements with Placement Service Agreements used by the defendants; and (3) the Main Street agents PIA represents with the mega-brokers with their unique market power. Worse still, politicians were racing to appear more “pro-active” than the next, irrespective of the truth or the harm they may cause to innocent parties like the PIA members who struggle each day to serve clients in a way that other industries envy.

The “piling on” had begun.  The National Association of Insurance Commissioners (NAIC) formed a task force to review the legitimacy of agent compensation and draft a compensation disclosure regulation.  The American free enterprise system itself was under attack by those who had never held an incentive-based job in their lives.

PIA’s leadership’s response was immediate and resolute.  We would keep our eye on the ball.  Our mission was, and always will be, to protect and defend the interest of professional, independent agents across the country.  From this we would not waiver.  Our members were being attacked for the wrongs of others.  Their livelihood was threatened, their ethics impugned and they were deeply offended.

PIA issued its first statement the day New York Attorney General Spitzer sued Marsh & McLennan.  Soon after, I was on my first of many flights to speak with an insurance commissioner.  One by one, PIA met with, educated and persuaded policy makers in state legislatures, departments of insurance, attorney general offices, the NAIC and the National Conference of Insurance Legislators (NCOIL) on the legitimacy of how Main Street agents earn their living.  Particularly, we established that consumers and the marketplace were very well served by a system that permits our carrier partners to reward their best and most professional agents with incentive compensation.

The results of PIA’s efforts: not a single legislature or insurance department enacted laws or regulation requiring agent commission disclosure or banning agent profit sharing.  Unfortunately, those unwilling to accept the outcome of the democratic process invoked a discomforting American tradition -- the lawsuit.  Various attorney generals, private parties and insurance commissioners forced settlements with several insurance carriers that required unworkable, inaccurate commission disclosure and banned agents from earning contingencies.  Most egregious was the fact that the affected agents were not party to these lawsuits.  Some Main Street agents who never heard of a “placement service agreement” were prohibited from earning profit sharing on personal lines insurance.  In sum, the remedy had absolutely no nexus to the original sins or the original sinners.

Despite these setbacks and the powerful forces aligned against the Main Street agents, PIA stayed on mission.  We could not let these inequities stand.  After exhaustive review and consultation with agents, lawyers, PIA staff and volunteers, PIA National entered the legal fray challenging the proposed settlements and their effects on its members.  The process has been arduous, time consuming and costly, but the outcome has been the withdrawal of agent required compensation disclosure notices.  Moreover, it has publicly aired our concerns and put our carrier partners on notice that this is the single most crucial issue for their agents.

Our battle persists. PIA’s advocacy before policymakers and the public continues to shape the environment in which Main Street agents work and, hopefully, thrive. As we like to say, we speak truth to power. In the last several months, a number of court decisions have upheld the legitimacy of our contingencies. And, legislators are becoming increasingly concerned with attorneys general preempting their authority by circumventing legislative decisions with lawsuit settlements.

Most recently PIA’s advocacy brought me to places like Seattle, Washington where the National Conference of Insurance Legislators (NCOIL) warmly greeted our concerns about defective legal settlements.  Places like Helena, Montana where Insurance Commissioner Morrison embraces a common sense approach to regulation and the role of agents in consumer protection.

I’m accumulating more frequent flyer miles than I wanted, but I’m making friends. Friends for PIA members.  Friends for Main Street agents.  Friends that will make a difference, and who understand how hard we work for consumers, our clients and to uphold the highest ethical standards in all we do.

Kenneth R. Auerbach, Esq. is President-elect of PIA National.

This article appears in the November/December 2007 issue of PIA Connection.