Have the BB&T insurance operations been served a subpoena by Eliot Spitzer in connection with the recent insurance scandals? I understand their insurance operations receive back door payments that Eliot Spitzer is looking to terminate. I also understand they receive payments from other third parties (like London brokers) that they do not disclose to their clients. Anyone know if this is being investigated?
Excerpt from last week's editorial by the Wall Street Journal, entitled, "Eliot's Insurance Policy." (Response to your assertion that the elimination of contingents would lower premiums.)
"If Mr. Spitzer is correct that PSAs were diverting corporate buyers only to those insurers that pay the highest contingent commissions, rather than those with the best deals, we could assume buyers would see real premium hikes.
"Not so. The insurance industry is well known for price competition and revenue roller-coasters. As recently as 2003, the average commercial policy-holder faced premium increases of 20% to 25%. Yet the majority of businesses that are due to revew their policies in Janurary 2005 will see decreases. This is hardly the profile of a captive, crooked market. The broker business is intensely competitive, and the idea that a broker would risk a long-standing client relationship by delivering a lousy policy for the sake of a one-time commission is hard to credit."
You really don't get it. Spitzer isn't going after Marsh and others for contingents, which in case you didn't know, is legal in all 50 states. Spitzer is going after them for "steering business," bid rigging and price fixing. Without the fraud, Spitzer has no case. There is no doubt that contingents need to be looked at by the insurance indusry for their potential conflicts of interest. But it's not the contingents, it's the allegations that surround contingents. Come on now. It can't really be that hard to distinguish between the two.
>> What triggered Spitzer's investigation was not contingents but fraud.
Incorrect, the contingent commissions were the fraud. The civil complaint filed last month by Spitzer alleges that "since at least the late 1990s, Marsh has designed and executed a business plan under which insurance companies have agreed to pay Marsh more than a billion dollars in so-called 'contingent commissions' to steer them business and shield them from competition. Styled as payments for nebulous 'services,' the agreements to pay these commissions were called 'placement service agreements,' (PSAs) and, most recently, 'market services agreements' (MSAs), by Marsh. Whatever the agreements were named, they created an improper incentive for Marsh."
>> Contingents ARE performance bonuses, paid by insurers to BB&T insurance, which is committed to finding the best policy for the best price regardless of the contingent.
Huh? Why the ex parte, and sometimes covert, incentives if Reece and BB&T Insurance Services are legitimately providing insurance brokerage services as contracted? As stated, if contingent commissions were eliminated, policyholders could purchase more insurance for less money, and presumably more fairly.
Anyone can sue anybody. Anyone doesnt always win if disclosure is above board. Spitzer is just trying to become the next Rudy. Unfortunately for him he leans to the left. The south doesnt lean left
Big Rear. Finally someone who understands the Insurance business and how agencies / brokers operate. Also keep in mind that joe q public rate insurance agents right up there with used car salesmen.eom
I agree with fact's 1&2&3. I will add my opinion: Probably 99% of small agencies, large brokers and etc. have contingency arrangements. They have been in place for multiple decades.
As to fact number 4, I disagree. How do you know that BB&T has lied to their customers? Were you lied to?
As to fact number 5, a lawsuit has been filed against the largest brokerage firms in the United States, which probably includes BB&T so it is being investigated.
As to fact number 6, BB&T is a public company. How do you know they have bought private firms that did not have the same controls in place? Do you work for BB&T or one of those private firms?
Fact number 7, I own BB&T stock and I think it is a good company. Why don't you get a clue and go buy some other stock if you really think the stock sucks or their is some black cloud hanging over the company because a small portion of BB&T is in the insurance agency/broker business.
BB&T's insurance revenues are peanuts compared to Marsh's revenues of about $8 B.
Fact: BB&T collects contingent commissions. They may call them something else but if it smells like a rat ...
Fact: Contingent commissions have led to inappropriate activiy at some brokerage firms and investigations are underway.
Fact: BB&T has told some clients (I have heard it directly from some of their employees) that they do not have those nasty contingent commissions that big bad brokers like Aon have.
Fact: BB&T (at least some of their employees) have lied to their customers.
Fact: BB&T management is hoping that Mr. Spitzer does not investigate them and their lies.
Fact: BB&T is a public company. They have recently bought some private firms that do not necessarily have the same controls in place. This could bite them.
Fact: wilsonbbt - you are blindly following your beloved BB&T. Get a clue. Their only hope is to discontinue collecting these payments and hope their large clients don't ask for an accounting or their lies will become known!