Spitzer Eyes Benefit Advisor Compensation

But Travers and other experts interviewed said brokers should disclose any special compensation arrangements.

Although the investigation might be unpleasant for some, "I think this is in the best interest of the employers and ultimately of the employees," says David Neikrug, chief executive of Bluefinch Corp., Valley Stream, N.Y., a fee-based human capital consulting firm.

The investigation should help brokers and consultants who want to collect simple, upfront commissions, according to Charles Crispin, chief executive of Evergreen Re Inc., Stuart, Fla., a medical risk brokerage firm.

"Weve always felt contingency override arrangements are inappropriate and represent a conflict of interest," Crispin says.

Insurance buyers have mixed feelings about contingent commissions: More than 80% of 330 buyers that Advisen surveyed earlier this year wanted more information about advisor compensation, but more than three-quarters said eliminating contingent commissions would either increase overall insurance costs or have no effect on costs, Advisen says.

In the small plan market, special incentive programs tend to mean free trips for brokers who bring in large numbers of new clients.

If a benefits advisor had to disclose that he would qualify for a free trip if he sold a few more health policies from a certain carrier, that "would certainly put a strain on the sale," Robinson says.

Eliminating the free-trip programs and similar programs could help the benefits market by forcing carriers to compete more on factors such as quality of coverage, quality of service, everyday prices and short-term discounts, Robinson says.

Reproduced from National Underwriter Edition, June 18, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.