Insurance Broker Allegedly Steals Millions In Commissions

Case Overview

This case involves a dispute between several owners of an insurance brokerage. It was alleged that one of the partners stole upwards of $2 million by having the managing general agent pay commissions to them personally rather than having payment pass through the company. The managing general agent claimed this was in line with typical industry practice, which requires paying commissions directly to the individual. An expert in insurance brokerage was sought to discuss whether it is customary for managing general agents to pay brokers directly or to pay them through the companies they work for if there is an existing relationship.

Questions to the Insurance expert and their responses

Please describe your experience in the insurance industry.

I have been an insurance managing general agent (MGA) and president of an insurance agency for 30+ years. I have recruited, trained, and have numerous agreements with various insurance carriers to this day. I have been a life underwriter training council fellow since 1991. I am also an accredited investment fiduciary (AIF), a certified fraud examiner (CFE), a dispute resolution arbitrator, and a qualified neutral under a midwestern state's rule of standard practices.

Are there any circumstances in which a managing general agent would pay a broker directly rather than through their company? Please explain.

How payment is handled depends on the written arrangement the MGA established with the insurance carrier and the broker. Many MGAs prefer to pay the broker through their entity as opposed to having the commissions payable to the broker by the carrier. It is entirely based upon the agreements established between the parties. If the checks were paid to the broker from the MGA's personal checking account instead of from the MGA's corporate account, that would be very unusual and would raise concerns in my eyes.

About the expert

This expert has over 30 years of experience in the financial services industry, specifically in the securities, insurance and commodities area. He has previously served as a financial advisor and a registered securities and options principal for Financial Network Investment Corporation, Raymond James Financial Services, Inc, and Shearson Lehman Brothers/American Express. He has conducted over 500 presentations, classes, and workshops on financial matters for industry professionals and the investing public. He currently serves as the CEO and chief compliance officer of a privately held registered investment advisory firm that he established in 1988 and as a FINRA and NFA dispute resolution arbitrator.

E-008366

Specialties:

Insurance

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