RIMS issues insurance agency compensation report, revises stance

The Risk & Insurance Management Society Inc (RIMS), issued a new executive report Wednesday to help risk managers better understand insurance agency compensation and potential conflicts of interest.

In the report, RIMS said it hopes to heighten bussiness’ awareness of the potential pitfalls surrounding the insurance purchasing process, so they are “empowered to press for greater transparency” in their negotiations with agencies as well as regulatory reform in their own states.

The report came as the New York State Insurance Department prepared to issue new agency compensation disclosure regulations. As the rules stand now, agents and brokers would have to disclose their compensation only if asked by the insurance buyer—a position RIMS has criticized for not going far enough to protect consumers.

In the report, RIMS recommends that business owners and risk managers require full disclosure of the nature of all compensation earned by their broker in placing their coverage as well as any service relationship or financial interest the broker may have with the recommended insurers.

The report details the different types of insurance agency compensation in the market and gives examples of provisions risk managers can include in their request for proposals that address compensation issues.

RIMS’ members can download “A Practical Guide to Insurance Broker Compensation and Potential Conflicts of Interest for the Risk Manager” at www.rims.org.