Spitzer Eyes Benefit Advisor Compensation
New York Attorney General Eliot Spitzer has added the employee benefits market to his investigation of broker compensation programs.
Aetna Inc., Hartford, and CIGNA Corp., Philadelphia, 2 insurers that now focus mainly on the benefits market, say Spitzers office has sent them subpoenas regarding broker compensation.
Both companies issued statements saying they intend to cooperate with Spitzers office.
Earlier this year, Spitzers office began using subpoenas to learn whether poorly disclosed broker compensation arrangements might be affecting brokers coverage recommendations. Until recently, Spitzers team had seemed to be focusing on the property-casualty insurance market, but the subpoena recipients now include several multiline insurers, brokers and insurance consulting firms with large benefits operations.
Experts interviewed say Spitzer and officials in other states are looking at “contingent commission” arrangements. The arrangements, also known as “override” programs or “placement service agreements,” supplement the standard, account-based commissions or fees that brokers get from their clients, according to Advisen Ltd., New York, a commercial insurance consulting firm.
Richard Travers, chief executive of Travers OKeefe & Associates Inc., New York, a benefits brokerage and consulting firm, says a properly disclosed contingent commission program could be an appropriate way for a carrier to reward a broker for the performance of an entire book of business.