Third I cant believe that Im still hearing this question about brokers

Third i cant believe that im still hearing this

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Third, I can't believe that I'm still hearing this question about brokers continuing to generate investment income on the premiums they hold before remitting them to insurers. Where is the backbone of the buyers? How can brokers still perpetrate this fraud on both buyers and insurers? Simply make out the premium checks to the insurers, not the intermediaries! Yes, I'm frustrated, because many of us have criticized this conflict- ridden and inefficient system for more than forty years! In October 1971 , Best's Review published an article of mine, "The Revolt of the Risk Manager." I opened that piece with these words: "Of all the institutions ripe for change, the insurance industry desperately needs a wrenching revolution.” “In a sense, however, it may be an exercise in futility," I continued, “because the industry is so imbued with a fundamental conservatism, so protected by crippling regulation and so supported by self-interest that its inefficiencies and conflicts would persist.” Nothing has changed. In that article, drawn from a speech to the San Francisco Chapter of RIMS, I suggested ten steps to change the system. Here are four relating to the discussions in New Orleans: 1."Substitute fees for commissions . The risk manager requires a variety of services in performing his function, many of which have little direct connection with insurance. He should purchase only essential and effective outside services. There is no reason why he should continue to be forced to buy a 'package' of services, some needed and some not, under the argument that there is no alternative to the broker/agent 'commission/ system. There is an alternative. Risk managers can insist on paying a fee to brokers and agents. They can insist on an annual accounting of time and expenses in order to support that fee. A fee related to premium volume is nothing more than a commission in disguise. This is
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hardly a denial of the need for a qualified broker. If he is, as he purports to be, a professional, he should be paid as one." 2. "Insist on direct meetings with underwriters . One of the traditions of the insurance business has been the avoidance of face-to-face confrontations between insured and underwriter. It is essential that the risk manager frequently meet his underwriter. The presence of a broker may or may not be desirable. The underwriter should be encouraged to leave the protective womb of his office to see first- hand the risks he may be asked to underwrite." 3. "Pay insurance companies directly . One of the reasons that the property/liability business is experiencing difficulty is that its collection procedures are archaic. If an insurance company writes a policy, it should begin receiving its proper premium as soon as it is at risk. The industry, however, has set up a system in which the broker or agent acts as collection agency. . . . In an age of lock-box banking and cash flow management, this is a complete waste of money." 4. "Eliminate contingency commissions . Many of the national
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