We just received another invitation to take advantage of an insurance company’s “supplemental compensation program.” Every time we see these solicitations, we feel our blood pressure rise. It certainly reinforces the practice of insurance companies referring to brokers as their “producers.”
Here is an example of the types of programs we’re talking about. We’re not trying to be critical of this specific insurer, because most of them do it. However, their whole intent is to tilt the playing field — to motivate brokers to sell more of their product, make sure it’s at profitable rates, and encourage year-after-year renewals.
How does this benefit the buyer (employers that sponsor group insurance benefits programs)? It doesn’t. It works as designed and subtly changes the broker’s behavior — to increase the sales and profitability of insurance companies. We’ve seen it in action. There is just too much money at stake.
For brokers or insurance companies to tell employers that this doesn’t cost them anything “because it’s in the insurance company’s overhead amount either way,” is simply untrue. It definitely costs employers more in the form of higher premiums and higher sales charges.
As a firm, we simply won’t participate in these programs. We won’t take the money. And we hope more employers will make sure their brokers and consultants won’t either.