Consumers of auto and homeowners insurance are vulnerable to the same potential conflicts of interest as commercial insurance buyers, according to a report recently released by the Consumer Federation of America (CFA), Washington, D.C.Using data from Best's Aggregates and Averages, 2004 Edition, total commissions paid to agents and brokers in 2003 for home and auto insurance ranged from zero to 30% of premium, the CFA reports. Overall, commission income was made up of roughly 90% regular commissions and 10% contingency commissions-the kind criticized by N.Y. Attorney General Eliot Spitzer.

Steering commissions-paid to agents for placing more business with an insurer-and profitability-based commissions are the two contingent-fee categories singled out as most troubling by the CFA.

Steering commissions might encourage a producer to choose to place a consumer with a company that increases the producer's income instead of offering the lowest rates, the report states. And profit-related commissions might entice producers to delay or discourage claims to keep their loss ratios lower.

Shortly following the release of the CFA report, the Property Casualty Insurers of America (PCI) and the Independent Agents & Brokers of America (IIABA), issued statements rejecting the CFA's findings.

"There's no study there," says Joseph Annotti, spokesperson for Des Plaines, Ill.-based PCI. "The CFA took some information that is public record and drew its own conclusions."

"Over the years, we've seen misleading and sometimes outrageous allegations made (by the CFA)," says Wesley Bissett, senior vice president of government affairs at Washington, D.C.-based IIABA. "That tends to discount the significance of this report."

--Therese Rutkowski

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