Post Spitzer, Contingent Commissions still in play

When Elliott Spitzer brought down the big brokers in a bid rigging scandal, contingent commissions (back end payments from carriers) were pretty much dead. Most of the big brokers declared they would not accept these payments in order to not be influenced on where to place insurance for clients. Well pretty much all the big players except Willis, are now back accepting contingencies. In the small to middle size agencies and brokers, this practice never went away. You may ask why the turnaround. Well quite frankly it is because companies have lowered commissions over the last 10 years that contingency commissions are the only way they can make profit. In a recent study by 98% of all agents and brokers depend on contingencies to make money. So now the big boys tried to go without it but the hard reality brought them back to accepting these back end payments. There is no question that this will continue. Does it affect the quality of service to clients? The answer is no. Agents and Brokers are professionals and can do whats best for clients and regardless of how they are paid. The real story is the insurance companies continual switch from income certain (transactional commissions) to income uncertain ( contingencies based on loss and profit). When 98% of all agencies are depending on contingencies which they have no control on how they are paid and when, the ultimate survival of the agency model could be in under extreme pressure.
Until next time be careful out there and know your risks. K

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