Reference no: EM131544756

As an insurance broker, Ashton & Ashton (A&A) seeks to obtain the best available insurance coverage for its clients. For this service, A&A charges clients a commission, which is a percentage of the amount of the premium, and the firm also receives a contingency payment from the insurance providers based on the volume of business. One of A&A's clients is a museum, which has a very tight operating budget. For many years, Haverford Insurance Company had offered the best policy for the museum and paid A&A an above average commission. The museum would be best served by continuing with Haverford, but another company, named Reliable, submits an unsolicited "low ball" bid that the museum might choose if it is presented to them. Should A&A present the bid to the museum and allow the client to make the choice, or should the firm present only the bids that would serve the client well? Complicating the decision is the fact that A&A would also benefit if the museum were to continue with Haverford, thus creating a potential conflict of interest.

1. Should A&A present the Reliable bid to the museum, knowing that the museum might be forced by financial pressure to accept it?
2. Does the compensation system for insurance brokers create the right incentives? Should the system be changed?