Marsh, AON and Willis are allowed contingents
Marsh & McLennan, Aon and Willis Group Holdings have reached an agreement with authorities in New York to amend their 2005 regulatory settlement agreements.
The world’s largest brokers will no longer be limited to the types of compensation they can receive or to the rigorous disclosure requirements set forth in their original settlements.
In a statement, Marsh said: “The actions by the New York State Insurance Department (NYSID) and the New York Attorney General have helped to restore a level playing field for Marsh and other insurance intermediaries.”
Under the Producer Compensation Transparency regulation, which will take effect on January 1, 2011, producers operating in New York are required to disclose to clients their role in the insurance transaction and whether they will receive compensation from an insurer based on the sale.
Greg Case, Aon’s president and chief executive officer, said in a statement: “Aon very much appreciates the moves made toward consistent business practices for all brokers. However, our overriding consideration is to act in the best interest of our clients at all times.”
A spokesman for both Willis and Aon revealed that while the agreement allows them to collect contingents, they have no current plans to do so.
“Willis will continue to disclose to our retail clients the compensation we receive from insurance carriers,” said a spokesman, before adding: “Willis will also continue to refuse to accept contingent commissions from carriers in our retail brokerage business.”
However, not all are happy with the rule enforced by the NYSID, and it has attracted criticism from the Risk & Insurance Management Society (RIMS), among others.
Scott Clark, director of RIMS’ External Affairs Committee, and risk and benefits officer for Miami-Dade County Public Schools, said: “RIMS had hoped that in the absence of a contingent commission ban, brokers would be required to provide full compensation disclosure, allowing the consumer to decide whether the broker is acting in their best interests. Unfortunately, the final regulation does not live up to that standard and, instead, the burden to request full disclosure has been placed squarely on the consumer.”
The ruling follows the July announcement by Arthur J. Gallagher & Co. that it would begin collecting contingents in October under an amendment reached with the Illinois authorities.
In 2005, the brokers agreed to pay more than $1 billion in client restitution and to cease collecting contingent commissions in order to settle allegations and concerns that they had steered business to insurers to maximise such commissions.
They have since criticised the current twotiered system, arguing that it put them at a competitive disadvantage.
