Don Bailey, CEO of Willis North America, had a simple message for insurance regulators in New York looking at broker compensation and contingent commissions: Eliminate them for everyone. Bailey’s testimony on the topic featured a well-reasoned call for the termination of all contingent commissions in New York within three years. According to an IFAwebnews.com article, Bailey even gave two suggestions for how to do it: Force agents who register for licenses to stop taking them or challenge the insurance industry to resolve its own problem. The first one makes sense; the second one seems unlikely to lead to a quick resolution, although it would be fun to watch.

Bailey asked New York Insurance Superintendent Eric Dinallo and representatives of the New York attorney general’s office to create a “level playing field” because Willis – and probably the three other major insurance brokerages that settled issues in New York over paying contingent claims – is at an “unfair disadvantage.” Of course, if you flash back a few years, prior to then New York Attorney General Eliot Spitzer’s investigation that led to the settlements and now the hearings about contingent commissions, many of Willis’ competitors would have argued that Willis had an unfair advantage. The playing field for Willis’ competitors then was as uneven as it probably seems now to Willis and the others who settled claims about contingent commissions in New York.

Ending contingent commissions is the right move. What remains to be seen is how best to do it and how long it will take afterward for another brokerage to claim that the playing field is once again uneven.

Nine types of insurance fraud appear to be emerging as trends this year, according to the Coalition Against Insurance Fraud’s just released 2007 annual report.

Eight of the trends identified in the report involve thieves taking advantage of the unsuspecting. They include: claiming the loss of a home from arson to get avoid foreclosure; selling a vehicle to someone, then claiming it as stolen; lying about where a vehicle is registered to obtain lower premiums; medical fraud rings; using immigrants to fake injuries in crashes or to be fake patients in health schemes; misdirecting prescription drugs to junkies (insurance fraud, the group says, is “the leading financier of this large drug problem”); schemes to get workers’ compensation fraudulently; and medical identity theft to steal a victim’s health insurance.

The ninth is insurance agents taking advantage of the unsuspecting. The report says “a disturbing number [of agents] stole client premiums without buying the promised coverage. Others sold fake coverage, or conned elderly clients into giving up perfectly good life policies and buying expensive new coverage they did not need.” (The report does indicate that “most insurance agents are honest.”)

Insurance sales are based on trust. Buyers have to be able to trust the people whose advice they are relying on for important, potentially life-and-death decisions. That “a disturbing number” of insurance agents chose to abuse this trust is extremely alarming, but no more so than if it were just one agent. For if any agent’s actions raise concerns, then it’s the whole industry that deals with the consequences.

Within hours of the news of the Willis Group’s planned acquisition of competitor Hilb Rogal & Hobbs for $2.1 billion, a number of agents attending the Professional Insurance Agents of New Jersey and New York Annual Conference in Atlantic City, N.J., began raising questions. Here are some that caught my ear:

• Was Willis aware of all of HRH’s agency acquisitions in recent years? Why would Willis “buy into the foolishness,” as one agent put it?
• What’s the benefit of Willis and HRH joining forces, when Aon Corp. will still be the biggest player in the game?
• What’s going to happen to me and when? Have you heard if they are cutting people? Was it in the announcement? Have you heard anything privately?
• Are any companies, even the big ones, safe from acquisition?

The answer to the first three questions remains to be seen, while the answer to the last one is clear. Further consolidation isn’t just likely, it all but mandatory, as insurance companies continue to seek new ways to cut costs and generate revenue. And no company, big or small, is immune.