Defining a role.

In the years since then-New York state Attorney General Eliot Spitzer began investigating the practice of contingent commissions, individual insurers and brokers have taken stands on either side of the issue. The largest brokerage firms no longer accept contingent commissions, and some of the largest insurers no longer pay them. But many other brokers, from some in the top 20 down to some of the smallest, strongly support the practice.

Is there a role for contingent commissions in today's insurance industry? "Absolutely," said Rod Leavitt, senior executive vice president of the Leavitt Group, which was No. 17 in Best's Review's 2006 ranking of top global insurance brokers. "In the agent's role, profit-sharing agreements are appropriate and fair. The interests of the agent, insurer and insured are aligned. It's similar to providing a bonus to an employee who did a very good job. On the brokerage side, it's appropriate as long as it is tied to writing profitable business. We are happy to enter into and benefit from profit-sharing or additional compensation arrangements."

For Best's Review's cover story this month, we talked with various members of the industry to find out if opposing views on the subject and the current dual system can survive. "A House Divided" on page 28 delves into the debate and some of its ramifications, such as increased examination of how brokers and carriers do business and new ways of evaluating brokers' services.

"Disclosure is absolutely essential," Leavitt said. "We put on our Web site and on a significant amount of our mail a full disclosure of any sources we get remuneration from."

Although some observers say that having major insurers such as American International Group, Chubb and Travelers pull out of contingent commissions will impact the industry more significantly than anything brokers might do, Leavitt is skeptical." [A company] not paying contingent commissions might have a slightly limiting factor on their attractiveness to brokers, but none of us would say 'no' if they are providing the best products and service," he said. "The needs of the client need to come first."

Sally Whitney is editor. You may reach her at [phone], Ext. 5340, by writing to A.M. Best Co., Ambest Road, Oldwick, NJ 08858, or by e-mail at [e-mail]. The e-mail address for Best's Review is [e-mail].