BIG “I” OPPOSES A.G. INTERVENTION IN INCENTIVE COMPENSATION
But encouraged by Chubb Guaranteed Supplemental Compensation Program
ALEXANDRIA, Va., Dec. 21, 2006—The Independent Insurance Agents & Brokers of America (the Big “I”) is disappointed to see another settlement out of New York Attorney General Eliot Spitzer’s office that bans the payment of contingent compensation that is entirely legal. The settlement is with Chubb Corp. and was joined by the attorneys general of Connecticut and Illinois.
Chubb’s settlement announced today marks an end to the company’s offering of contingent compensation calculated retrospectively at the end of a production year in all lines of insurance, and the start of a new system of supplemental compensation in 2007. Chubb’s new Guaranteed Supplemental Compensation (GSC) program will provide agents with supplemental compensation based on their past performance and results with the company, which Chubb expects overall to be “substantially equivalent” to past contingent compensation it paid.
“It is well known that we strongly disagree with the actions of regulators and attorneys general to ban payment to agents of any legal form of compensation,” says Big “I” CEO Robert A. Rusbuldt. “Incentive compensation is a perfectly legal way to compensate salespeople in virtually all industries across America, and to eliminate the right of any business to determine how to lawfully reward its sales force punishes an entire industry for the improper actions of a few. However, Chubb has provided a clear plan about how it will compensate agents and brokers in the future, and we commend Chubb for providing this information and letting agents know what the future holds for them.”
“Chubb’s announcement today explaining the parameters of its plan for the future to reward sales excellence via a Guaranteed Supplemental Compensation program provides some certainty in an evolving and unpredictable business environment, and agents value this type of communication about what the future holds for them,” says Big “I” President Alex Soto.
The Big “I” continues to defend and support incentive compensation as a legal, legitimate form of compensation that is employed in all sales-based industries. Any compensation system can be abused, but the problem lies with those few who abuse it, not the system itself.
“Certainly, it is true that a few bad actors in the commercial lines sector abused the incentive compensation system, and anyone who breaks the law should face the consequences,” says Debra Perkins, Big “I” executive vice president and general counsel. “However, state attorneys general should not be determining through settlement agreements business practices for companies that are already complying with the law.”
“Chubb has taken a bold step by the development and announcement of its Guaranteed Supplemental Compensation program. The Big ‘I’ will continue its dialogue with individual companies as well as its other work in the industry to preserve the right of carriers to fairly compensate agents,” says Rusbuldt.
Founded in 1896, IIABA (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 all lines of insurance—property, casualty, life, and health—as well as employee benefit plans and retirement products. Web address: www.independentagent.com.
###