Among insurance brokers, two distinct business models have emerged–those who earn contingent commissions, and those who do not–and not necessarily by choice, thanks to settlements struck by regulators and prosecutors with mega-brokerages to close the books on allegations of bid-rigging and contingency fee abuse.
This reality has had a profound effect on the earnings and operations of the four mega-brokerage firms, prompting a revamping of compensation systems presented to risk managers shopping for services. However, brokerage executives say the debate shouldn't just be about price, but focus on the relative value clients receive.
“It has forced us to refine the value proposition more significantly,” said Eric Andersen, chief executive officer for Aon Risk Services U.S., a unit of the Chicago-based insurance broker Aon Corp. “The reality is, for us to get paid for the service…we have to be very particular about what that value is.”
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