Academic Pans Litigious Approach To Broker Reform

A risk management professor is questioning whether a barrage of regulator subpoenas and lawsuits is the right way to change commercial insurance broker compensation practices.[@@]

Some brokers and insurers may have participated in bid-rigging arrangements and other abuses that really are illegal, according to William Feldhaus, an associate professor at Georgia State University’s business school.

But payment of commission overrides, or commissions contingents on the performance of a producer’s block of business rather than a single case, “has been around for decades,” and many larger clients already take commission overrides into account when negotiating ordinary broker commissions, Feldhaus said in an interview.

This may be a good time to improve compensation disclosure, or even to scrap the commission override system entirely, Feldhaus says.