Opportunity knocks for independents: it's fat city for independent brokers today—and not just because of Eliot Spitzer's investigation, which has companies wondering just who exactly their broking bedmates are

Risk & Insurance, July, 2005 by Lawrence Richter Quinn

Bailey says that Acordia has also worked actively with Bose "to lower our risk management costs. We know what we are paying for with Acordia and are satisfied with their pricing policies. It's easier now to determine the value of services provided."

Now, says Bailey, "we won't be surprised. That's what we're looking for and that's what we think we're getting."

Some companies are willing to pay what in effect are bonuses for a job well done by their brokers. That's the case at Marriott. It is also the case with Piano, Texas-based Perot Systems, who works exclusively with brokerage house Palmer & Cay, and Whirlpool, among others, where the goal is to make sure that, if it awards a bonus, part of it actually ends up in the paychecks of the broker staff working on its behalf.

"The broker's putting some of his fee at risk with our fee structure, but they know if they perform well we will follow through, not only with a base fee but with a bonus based on our specifications," says Whirlpool's Kilburg. "Particularly with smaller brokers, it gets their attention. We just don't believe the largest brokers' internal compensation systems allow such an incentive to get directly to the (individuals) on the brokerage staff for superior performance on our work."

What have been the results to date? "Both of our independents have gotten their bonuses this year," says Kilburg. "On the other hand, Marsh in the past has received such a bonus infrequently."

Ultimately many risk managers see the Spitzer investigation--and the resulting questions asked along with a move to the independents--as benefiting the profession itself, protecting their companies and shareholders.

"Risk managers need to take responsibility for their costs associated with broker revenue and manage the cost of risk," says Dana's Bennice. "Not withstanding being lied to or deceived, risk managers in part caused these current problems. They need to take responsibility and fix them, and are doing just that."

LAWRENCE RICHTER QUINN, a Washington D.C.-based freelance writer, is a regular contributor to Risk & Insurance[R]. He can be reached at riskletters @lrp.com.