First witness is Don Bailey of Willis Group. For Willis, the appearance of a conflict of interest was at the core of their decision to forgo contingent commission. At the same time, they created a "client bill of rights" to codify the relationship between broker and client. They strongly support full transparency, but they don't think it's enough. Says transparency doesn't repair the conflict. Questions whether a broker who receives profit sharing will be motivated to fight for payment of a claim when that payment might reduce profit sharing. Calls it a potential conflict of interest.
Says that "there is no level playing field" in insurance today. Claims Willis is at a competitive disadvantage against brokers who accept contingents. Willis's prices seem higher than competitors because other brokers receive a "subsidy" in the form of contingents. He's also complaining about the costs of compliance with their agreement with former AG Spitzer.
Says Spitzer missed a big opportunity to ban contingent commission altogether. Clients will benefit from the abolition of contingents over a "reasonable" length of time. Suggests a 2-3 year phase-in program to allow brokers to adjust business models. Calls for full transparency in the interim.
Willis believes clients do care about contingent commission (all evidence to the contrary).
Willis is asking for 3 things:
- Abolition of contingent commission
- Full transparency of compensation
- Level playing field for all brokers
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