July 10, 2005

Brokers' Commission Disclosure : Cut the Knot?

Insurance blogmeisters George Wallace and Bob Sargent have an ongoing discussion over the ethics and legality of duties and responsibilities of agents and brokers. This arises in the current controversy over undisclosed contingent commissions and other revelations in the insurance intermediary business. George himself acknowledges that the discussion has reached a level of dryness and complexity that one might think could frustrate the average state legislator. (See: Declarations and Exclusions: In Answer to Bob Sargent's Question . . .)

Perhaps this debate (and others like it) best demonstrates that this issue is too complex for the average lay person who is buying personal or commercial insurance to follow, even if they wanted to. The issue becomes much like insurance rates and forms. Decades ago, insurance regulators decided that rates and forms were too complex and variable for consumers to be expected to follow, and imposed regulations requiring that they be filed. Some states require them to be approved by a regulator before use, or subject to review after use. Some may also require affirmative non-waivable disclosures to insurance purchasers before or at the time of sale.

Has the time come to make similar provisions for the compensation terms of insurance agents and brokers? Or would such regulation stifle the creativity in the field that may be necessary to make a market? Perhaps in consumer lines a different argument could be made than in standard commercial or in specialty lines (such as those Bob Sargent focuses on)?


Posted by dougsimpson at July 10, 2005 06:39 AM