Brokers are beholden to the insurance companies they represent and know that moving business from them can bring them severe economic disaster. Every agent contract we have reviewed allow the carrier to terminate the agent/broker appointment at any time without cause. Overrides and bonuses (often not disclosed to the customer) based on production have the intended effect of “capturing” the agents self-interests controlled by the insurance company he represents. The broker/agent is thus held hostage by the insurance company at the expense of the interests of his client. This conflict of interest is not clearly understood by most employers who purchase insurance through independent brokers.
Insurance brokers fear insurance companies because they know the carriers can, and have, terminated agent contracts at will.
We know of many instances wherein a carrier has terminated an agent’s contract without cause, leaving the agent without commission income earned through his efforts on behalf of the carrier he represented. We have also had a carrier group representative boast to us that he was about to have his company terminate a local broker’s contract because “he moved a major account from us last month and we dont think he gave us a fair shot at renewing it.”
Employers should demand full disclosure of all compensation earned by their agent/broker. This should include bonuses, overrides, servicing fees, commissions, vacations, vouchers and anything else of value. And, it should be contained within a written contract between the employer and the agent/broker.