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Big "I" Addresses Agency Compensation


Nation’s leading insurance association warns against mischaracterizations by interest groups


WASHINGTON, D.C., Oct. 28—In the wake of New York Attorney General Eliot Spitzer’s investigation into alleged illegal bid-rigging by Marsh & McLennan and Marsh Inc., the Independent Insurance Agents & Brokers of America (the Big “I”), the nation’s largest agents and brokers group, is addressing the growing mischaracterizations being disseminated about insurance agents’ business practices, including incentive compensation.


Recently, some private-sector interest groups have called into question legitimate incentive compensation programs, which are used widely in many industries, including insurance, to reward outstanding sales performance.


“To suggest that incentive compensation should be ended because a few bad actors abuse it is like saying we should ban college athletics because some programs may cheat,” says Big “I” CEO Robert A. Rusbuldt. “The goal of the investigation should be to prosecute those alleged to have committed crimes or engaged in illegal activities. That is exactly what Attorney General Spitzer is doing, and we applaud him. There is no place in the insurance industry for unlawful conduct, whether it is related to compensation issues or anything else. We want there to be responsible reforms to address real issues, not theoretical problems.”


The Big “I” also is outraged by accusations and suggestions by some special interest groups that agents may delay or discourage filing their customers’ claims to enhance the chance of receiving incentive bonuses based on customers’ loss ratios.


“Claiming that agents would delay the filing of a claim because of incentive compensation is ludicrous,” Rusbuldt says. “A responsible agent simply is not going to delay the filing of a claim if his customer’s house burns down, car is wrecked, or property is damaged in a natural disaster. This is an unsubstantiated allegation being spread by groups that apparently do not understand how agents do business. It is preposterous as well, since customers may choose to call in claims directly.”


In fact, independent agents provide value to consumers because they offer a choice of insurance companies. They are not locked into one company’s insurance products and can seek coverage that is tailored to the needs or desires of their customers. Independent agents help insurance buyers navigate the complex array of insurance coverages rather than pushing one particular company or policy that may not meet the needs of the individual customer.


“Independent agents provide substantial value to business and personal customers,” Rusbuldt says. “Value can mean different things to different people, because one size does not fit all. It can be based on the price of insurance, the financial strength of the insurer, the speed and quality of claims service, the breadth of coverage, or other factors. To suggest that this assessment is formula-driven is an oversimplification and fails to respect the unique needs and desires of different customers.”


No regulatory system is perfect, and that is why the Big “I” continues to support targeted federal reforms within the context of the existing state-based regulatory system. The Association supports the State Modernization and Regulatory Transparency (SMART) Act discussion draft, the legislative outgrowth of the “road map” proposed in March by House Financial Services Committee Chairman Mike Oxley (R-Ohio) and Insurance Subcommittee Chairman Richard Baker (R-La.).  The SMART Act would preserve state-based regulation, which is important to note because it was, after all, an action under state law, not federal law, that has brought this issue to a head.


While some organizations are now calling for federal insurance regulation in order to curb abuses, the Big “I” is reiterating its support for the Oxley-Baker plan. It remains the Big “I” position that federal regulation would be an ineffective solution.


“The idea that federal regulation is a panacea that will magically end alleged abuses of the system is completely off-base,” says Big “I” Senior Vice President of Federal Government Affairs Charles Symington. “If federal regulation is a cure-all for these kinds of problems, why did the scandals involving investment banks and mutual funds, which were federally regulated, occur? The savings-and-loan crisis also happened under federal regulation. Clearly, a federal regulator is no guarantee against illegal activity.”


In truth, Symington says, existing proposals for optional federal regulation would provide weaker oversight than currently exists, because OFC would allow companies to choose their own regulators and pit one regulator against the other.


“To allow companies essentially to choose which regulators oversee their business practices would weaken oversight of the industry, which would be bad for consumers,” Symington says.


Founded in 1896, the Big “I” is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer property and casualty insurance, employee benefit plans and retirement products. Web address:


​127 South Peyton Street
Alexandria VA 22314
​phone: 800.221.7917
fax: 703.683.7556

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