Movement on Many Fronts

Summertime is wonderful. I love the heat and all the bright colors. I love to wear shorts and a golf shirt. I love to sit on the deck in the evenings, enjoying a nice Kentucky breeze while watching the birds. I love to play golf and win a few bucks from my old buddies. I like to put the top down on my Mustang and cruise around the neighborhood. All of the summer activities can make it hard to concentrate on business and selling. But, as we all know, commerce does not pause during good weather. In fact, summer is a great time to cement relationships with clients while enjoying the great outdoors.

The work of the Big “I” does not pause during the summer either. While the association continues to experience excellent progress on Capitol Hill, a couple of recent developments once again threaten our way of doing business.

In positive news, the House of Representatives passed the Flood Insurance Program Reform Bill by a rousing tally of 416 to four. The Big “I” was instrumental in getting several essential provisions in the bill, including business interruption and additional living expense. Policyholders who choose to buy these coverages would pay actuarially correct rates. Businesses and homeowners alike need the ability to purchase. The bill probably will take a different form in the Senate and go to a conference committee. Parties who are not interested in any type of flood program expansion fear that it will lead to the development of flood-prone areas. But if correct rates are charged, then policyholders deserve the ability to purchase additional coverages and the tax-paying public should not have to provide these monies through government loans or grants. If the Senate picks up the pace and passes this program, then it may be able to survive and thrive.

Last month, I mentioned a huge threat to our way of doing business. We all are familiar with the lawsuits and settlements over producer compensation disclosure and carriers’ profit-sharing agreements. The Big “I” and our state associations, through reasonable discussion and compromise, have stopped draconian laws from being adopted that could have ended a sales compensation practice that rewards excellence. The settlement agreements that some companies have entered into with state attorneys general require those companies to stop paying contingent commissions if 65% of gross written premiums for a certain line of insurance are written by companies that do not pay contingent compensation, including companies writing through the direct or captive channels. Some agents are concerned that this could be approached in the near future on personal lines since business of all channels is counted toward the 65% test. If this happens, some companies could be forced to abandon their profit-sharing agreements. In my opinion, this is preposterous, ridiculous and un-American. I feel that publicity-seeking, politically ambitious individuals should not circumvent the legislative process by lawsuits and settlements.

The Big “I” will continue to lead the way to preserve the right of companies to reward sales excellence. We must be prepared to address this issue in statehouses across the country, when necessary. An entire industry should not be punished due to the misconduct of a handful of bad actors. We continuously have stated that those who broke the law should be punished—and we believe that strongly. I praise Liberty Mutual, which is standing firm in its commitment that its commission payments and reinsurance brokering based on “legitimate and standing industry practices were appropriate and lawful.” Liberty Mutual made clear that the allegations of wrongdoing against it are incorrect, and notes that two of its former employees violated the company’s standards of conduct in their quotation activity. It has refused to enter into settlement agreements barring the payment of contingent commission and has said that it will vigorously defend these allegations against it.

The Big “I” has a policy available on disclosure by brokers, and has provided state association executives with information on disclosure for members. I believe that political pressure should not fundamentally change the way we do business. The Big “I” will continue to fight to preserve our system and the right of companies to determine how to compensate its sales force. That I can guarantee!

Bill Stiglitz
President