NEWS AND ARTICLES
Learn More about Overrides – A Standard in the Benefit Brokerage Business .
In October of 2004, New York Attorney General Eliot Spitzer's lawsuit against one of the countries largest and most reputable consulting firms, charged the company with bid-rigging to maximize income from carrier overrides. Since then, Spitzer's probe has produced numerous lawsuits and investigations into insurance brokerage practices at many highly respected, national firms. The probe has also prompted leading benefit consulting firms to change their policies regarding standard override practices. The number of firms subpoenaed by Spitzer continues to grow and several have agreed to provide financial restitution to settle related civil fraud and antitrust charges.
So what does this mean to you?
It's quite simple really. Overrides that often represent from 5% to 20% of a firm's income from plan activities can influence which companies consultants and brokers distribute their Requests for Proposals (RFP) to and/or how they ultimately communicate the results thereof to their Clients. This “steerage” may result from something as simple as a biased statement of recommendation or an executive or firm instructing its account managers to request bids from a strictly limited group of vendors or insurance carriers, thereby directing staff to disregard other potential vendors in their analyses.
With either simple tact, a consulting or brokerage firm quickly consolidates marketing efforts to the insurers that pay the highest overrides. Simultaneously, they limit their Clients’ opportunities to obtain superior solutions in favor of self-serving, personal priorities and/or the overriding financial objectives of the firm.
What can you do to address your risk?
 At a minimum, determine whether or not a firm has been subpoenaed in conjunction with override or contingent fee activities, and ask your broker directly if they receive overrides.
Require complete disclosure of recent compensation and review 5500 support from each of your carriers.
Request documentation detailing lawsuits brought against the firm, its parent and/or any subsidiary or affiliate accepting incentive or contingency based commissions.
Have your consultant or broker attest to the accuracy and completeness of all requested documentation.
Inquire as to recent changes in policy with regard to overrides, including a description of previous policies and how such policies may have affected the advice provided you to-date.
If concerned, request and review the most recent carrier proposals used to prepare comparative financial analyses for your evaluation and decision-making.
Evaluate the potential impact of any previously undisclosed overrides and consider reevaluation of your current carrier and/or broker arrangements.
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