The association stressed that brokers should be acting solely in the interest of their client
The Risk and Insurance Management Society (RIMS) has released a report calling on insurance brokers to instigate complete transparency and full disclosure of all revenue streams.
The report stressed that any compensation to the broker from insurers with whom the broker places client business must be transparent or eliminated altogether, thus ensuring brokers are acting solely in the interest of their client.
The report is meant as a guide to assist risk managers in understanding insurance broker compensation and potential conflicts of interest.
RIMS said its ultimate goal is to heighten members’ awareness of the potential pitfalls surrounding the insurance purchase transaction, so that buyers can press for greater transparency from brokers as well as for regulatory reform in their own jurisdictions.
“The industry has yet to mandate full disclosure, which means risk managers must be diligent in their broker selection process. This report gives them the tools they need, not only to successfully make that selection, but to drive a higher standard of conduct industry-wide.” says Deborah Luthi, director, RIMS External Affairs Committee and director of enterprise risk management at Matheson, Inc.
In tandem RIMS also released a position statement on broker compensation. It reiterated that risk managers should demand full transparency of all revenue streams by the broker in advance of any submission to market, purchase or placement of coverage.
Other topics covered within the report, called “A Practical Guide to Insurance Broker Compensation and Potential Conflicts of Interest for the Risk Manager”, include:
• An extensive outline of insurance broker compensation types;
• Tips for crafting an effective request for proposal;
• Recommendations for delineating services to be provided and associated charges within a Service Level Agreement (SLA).