"Trusted," redefined

This big health insurance company relies heavily on insurance brokers to sell group policies to small and medium-size businesses, according to an IT pilot fish working there.

"While looking over some Cobol code, I came across a curious bit of logic, where a broker's commission wasn't calculated at the standard rate, but rather was input by the brokers themselves!" fish says.

"Only certain brokers had a special code to enable this logic. I stopped in at our CFO's office -- he had an 'open door' policy -- to ask him why we allowed some brokers to calculate their own commissions."

CFO explains that these "trusted brokers" either have high sales numbers or work in undermarketed areas, such as rural markets. Their contracts set their commission rate at 24.8 percent, and also specify that the brokers get to collect the premiums from customers, calculate and keep their commissions and send the rest to the company.

Fish goes back to his desk and, out of curiosity, cranks out some code to calculate the average self-reported commission for the trusted brokers, month by month for the past three years.

Turns out that during slow months, about one-third of the brokers are keeping an average of 48 percent of their premiums as commissions. Then in busier months they keep only 15 percent, in order to balance things out.

"But for the year, they're far exceeding their contractually allowable 24.8 percent," says fish. "The company is losing about $5 million per year in overcharged commissions!

"I went back to the CFO and explained how some brokers were 'enhancing their cash flow' in violation of their contracts, costing the company millions plus the loss of future value of the premiums not received in earlier months and years."

CFO is impressed, and tells fish he'll take care of this right away.

A year later, fish leaves for greener pastures, but another two years after that he's back -- this time as a highly paid contractor. And to his surprise, his old folder is still on the network.

Scanning through the folder, he spots the script he wrote that looks for exceptions in the self-reported broker commissions.

"On a whim, I decided to run it again to see how things have improved since three years earlier," fish says. "And this time, I calculated the company was now losing $6 million per year on overcharged self-reported commissions.

"Well, if it's not a priority for them, it's not a priority for a mere contractor like me!"

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