The decision by St. Paul Travelers to end payment of contingentcommissions is only the beginning of a movement that willeventually see the end of the practice throughout the industry,Connecticut Attorney General Richard Blumenthal predicted lastweek.

The comment came in a statement noting that St. Paul Travelersplans to stop paying contingent commissions for all lines by2008.

In an agreement made last year between the company and then-NewYork Attorney General Eliot Spitzer, Mr. Blumenthal and IllinoisAttorney General Lisa Madigan, St. Paul Travelers agreed to end thepayment of contingency fees on business where 65 percent of theindustry did not pay them.

In December, Mr. Spitzer (who took office Jan. 1 as New York'sgovernor) ordered four carriers–ACE, American International Group,St. Paul Travelers and Zurich–to stop paying contingents on fourlines in which the trigger had been hit.

Mr. Blumenthal said he received a letter dated Dec. 29, tellinghim that St. Paul Travelers would cease the payments on those fourlines and stop contingent payments on all lines of business by Jan.1, 2008. The company said it would go to a fixed commission on alllines at that time.

National Underwriter reported last week that St. Paul Travelerswas advising its agents on plans to go to a fixed commission in anarticle on the future of contingency fees (see NU, Jan. 1, page 6,“Contingency Probe Fallout Hurts Many Innocent Bystanders, ProducerGroups Say”).

The move by both St. Paul Travelers and Chubb (which said inDecember it is going to a fixed compensation program as well), “aresetting the stage for an historic change in how the insurance worlddoes business,” according to Mr. Blumenthal.

“I expect contingent compensation bans will be contagious in theindustry–eventually ending the pay-to-play culture altogether, andrestoring consumer trust,” he said.

“Ending contingent commissions, and replacing them with fullydisclosed fixed commissions, would be good for both insurers andconsumers,” he added. “Less money spent by insurers to market theirinsurance through contingent commissions will mean lower insurancerates for consumers.”

While admitting no guilt, Chubb and St. Paul Travelers havetogether paid more than $88 million to settle allegations ofbid-rigging in exchange for undisclosed contingent commissions.(For more on the Chubb deal, see NU, Jan. 1, page 21.)

St. Paul Travelers did not return a request for comment on thisstory at presstime.