“Dispassionate objectivity is itself a passion, for the real and for the truth.” —Abraham Maslow
When Charlie Wilmerding was an underwriting trainee at Chubb, fresh out of college, he saw firsthand the inherent conflict of interest that has plagued the traditional relationships between insurance agents/brokers and their clients for decades.
Early in his career, he offered an agent a 20% premium reduction on an upcoming renewal of one of the agent’s clients. “We’re not going to do that,” the agent retorted. Charlie asked, “What do you mean, ‘We’re not going to do that’?” The agent said, “I’m not taking a 20% haircut on my commission, so I’m going to tell the client that their renewal premium will remain the same as expiring. They’ll be fine with that.”
That conversation made it clear to Charlie that so long as commission was part of the insurance transaction, clients were never going to be treated as fairly as they deserved to be.
After a few years working on the insurance company side of the business, Charlie joined a large multinational broker, where he saw—again and again—how agents and brokers have every financial incentive to keep their clients’ premium the same or higher in order to maintain or increase the amount of commission they were paid.
This creates an inherent conflict of interest. On one hand, buyers of insurance are trying to reduce their insurance and risk-related expenses wherever possible; on the other, their supposedly trusted advisors (agents and brokers) are motivated by how much premium clients are willing to pay, regardless of how much insurance they actually need and whether it is for the best price the broker or agent could negotiate on their behalf.
The concept of eliminating commissions and moving to a fee-for-service model is hardly new: it has been around since the 1960s. But until the early 1990s, it was only available to clients large enough to compel brokers to accept it.
In 1997, Charlie decided it was time for a change.
To give clients of all sizes the same benefits that had previously only been enjoyed by the largest companies, he created Altus. The name comes from Latin for “height and strength, as in ideas,” which captures the firm’s commitment to help clients of all sizes navigate the often confusing world of insurance and to focus on providing advice over simply selling products.
By giving clients the power of objectivity—a tool traditionally unobtainable through commission-compensated agents and brokers—Altus has been able to significantly reduce clients’ insurance and risk-related expenses, regardless of prevailing market conditions.
As a result, Altus has grown to now serve individuals, families, and corporations in all fifty states and in 67 countries around the world.
Shaping tomorrow’s risk management. Today.
Eliminating commission from all insurance transactions is a step that was long overdue. Virtually all other types of financial service businesses have either removed or significantly reduced commission—to the benefit of their clients. Altus continues to believe that brokers and agents can provide great value to clients, but only if they are compensated not by how much commission they can earn, but by how much clients can profit from their impartial advice and counsel.
Altus continues to execute on Charlie’s founding vision of giving clients cleaner access to insurance markets with less frictional costs, so that they can buy just the right kinds and amounts of insurance that they want and need. No more and no less.
But before Altus can say it has fulfilled its promise to transform the business of insurance, there are still challenges to overcome. For now, we can provide our fee-based approach to only our corporate clients because regulators, insurers, and agents/brokers see no reason to change a system that’s been entrenched for so long.
Because the power of objectivity is an idea whose time has come, we’re working with the regulators and insurers to change the rules for our private clients as well. And when we do, how insurance is purchased and risk is managed will finally put all clients first.