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Ceturtdiena 22.03.2018 | Name days: Tamāra, Dziedra

Cash-in-hand realized through brokers' commissions

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It is possible that in the past and currently through the part of insurance brokers who act as intermediaries between buyers of insurance services and insurance companies, brokers might have realized cash-in-hand. Such schemes, where a broker receives a premium from the insurer, who has won the tender.

Part of the money broker «gives further in cash» – have been practiced, especially, in state and local procurement of insurance services. The schemes have been discussed a lot in the backgrounds, but people are afraid to talk about it publicly.

Many insurance companies in Latvia, including the notorious RSK Apdrošināšanas AS case consider broker service fees are as payment for «customer attraction», which is not right, because essentially the insurer wins a tender due to his offer, which has been regarded as the best.

Insurance broker service – the evaluation of tender – is used mostly by a client. The client should be the one to pay the broker’s services and it has also been declared to be done this way by the Chief of the Procurement Monitoring Bureau. After the current situation, the insurance broker, possibly assists in the tender «to choose the company», which has the best offer, but which at the same time intends to pay the broker the largest or one of the biggest commissions. However, this commission, of course, is included in the premiums paid by the customer – the buyer of insurance services. Consequently, there is suspicion that in the previous years, state and local governments have wasted millions of lats.

The recent incident that was reported by Dienas Bizness described possible unfair Latvian National Opera health insurance contract. This also shows that the insurance brokers, who are not selected by tender and for which instead of a subscriber pays the insurer, expect to receive the maximum possible fee from the insurer, who wins the tender. It is possible that «someone will also be paid in cash» for one or another favorable outcome – at the taxpayer’s expense.

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