Marsh Gives Web Site Fee Disclosure Details

By Arthur Postal, Washington Bureau Chief

NU Online News Service, Aug. 26, 4:18 p.m. EDT?Marsh, Inc. brokerage said that its plans for a special Web site explaining the controversial contingency fees it accepts from insurers will include an interactive link to provide customer-specific information.

The company said its clients using the link will be able to learn how much Marsh is receiving from insurers as incentives for bringing the customer's specific business to an insurer.

Marsh said a full explanation of how the fees work will be on the site when it is launched Sept. 1. Known also as market service agreements, MSAs, placement service agreements, PSAs or contingent commission agreements, the arrangements have come under scrutiny as a possible conflict of interest by the offices of the New York Attorney General and California Insurance Department.

Critics of the fees suggest that in order to secure them brokers could be led to advise clients to accept overpriced, unneeded or insufficient coverage. Numerous lawsuits have been filed against brokers alleging the fees amounted to "undisclosed kickbacks."

Brokers have responded that they have made no secret of the fees and they are a longstanding practice.

New York Attorney General Eliot Spitzer subpoenaed the records of at least three large brokers in April, and California Insurance Commissioner John Garamendi disclosed within days that he, too, is looking into the practice.

Last week the company, while confirming for National Underwriter that it planned something for the Web concerning the fees, would give no details.

Yesterday the brokerage provided a letter that the president of Marsh, Roger Egan, wrote to clients Aug. 6 describing the enhanced disclosure it will be providing through the new Web site.

Barbara Perlmutter, a public relations official for Marsh in New York, said the site will be a "central repository of comprehensive information on MSAs, including a description of MSAs and how they work and a listing of insurers with whom Marsh has MSAs." It will also provide a direct link for clients to obtain an MSA calculation relating specifically to their placement.

She said she did not know the status of Spitzer's probe into Marsh on the MSA issue; Spitzer's office has been tight-lipped on the status of the inquiry.

According to the letter, the Web site will also contain a sample MSA contract, Marsh's global average MSA factor, wholesale commission practices as well as Marsh's code of conduct for the insurance transaction.

Marsh was asked about the probe the after the announcement by the Risk and Insurance Management Society,the trade group for insurance buyers, that it is revising its guidelines regarding MSAs, presumably as a result of the Spitzer/Garamendi probes. "RIMS strongly advocates complete transparency and full disclosure of compensation agreements without client request," the new policy says.

Ken Crerar, president of the Council of Insurance Agents and Brokers, reacted to the new RIMS policy by saying CIAB members are "fairly pleased with it generally." Mr. Crerar noted that the CIAB, on behalf of its members, has "always been a big fan of disclosure and transparency and we have urged our members to do that."

He added that the RIMS statement "confirms that this is a critical part of the relationship between a client and a broker." As part of that relationship, Mr. Crerar said it is "necessary to retain the trust to retain the relationship. We continue to dialogue with RIMS, as we have since 1999, on levels of disclosure on how to accomplish an acceptable level of transparency."

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Marsh Gives Web Site Fee Disclosure Details

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