Marsh has announced it will not accept controversial contingent commissions in its U.S. core insurance broking segment. The brokerage firm said it would refuse contingent commissions on any placements for any U.S. core broking operation clients, and will continue to provide detailed disclosure information on transactions, including all quotes received and compensation information.
However, Marsh & McLennan Agency LLC and Marsh Consumer’s affinity sponsored program and personal lines businesses will accept contingent commissions. For these segments, the firm said it will provide plain language disclosure that meets or exceeds the New York Insurance Department’s disclosure Regulation No. 194, as well as all other applicable legal and regulatory requirements.
The New York Department’s rule, effective next year, followed a 2005 investigation that revealed large brokers had been taking hidden contingency fees to steer commercial clients to a group of insurers involved in a bid-rigging scheme. Marsh was among the brokers involved, and as as part of 2005 settlement agreements, said they would not accept contingent commissions.
Last month, it was announced that Marsh — as well as Aon Corp. and Willis Group Holdings plc — had reached an agreement with New York, Illinois and Connecticut officials that would permit them to resume taking the commissions, providing they would abide by New York’s new disclosure regulations.
Willis, which abolished contingent commissions in 2004, said it would not resume taking them.
Under the New York rule, agents and brokers must describe their role in the insurance transaction and how they are paid. More detailed information will have to be provided at the client’s request. The Independent Insurance Agents and Brokers of New York has said it will sue to block the new regulation, arguing that it is too burdensome.
Marsh said it will continue to collect enhanced commissions and fees for services from insurers with respect to its core broking operations. “These forms of compensation, which are paid in consideration of Marsh’s provision of specific services to insurers, are fixed in advance of insurance transactions and are not related to volume, retention, growth or profitability,” the company noted. “Serving our clients is our top priority,” said Joseph M. McSweeny, president of the U.S. and Canada Division of Marsh. “We will continue to distinguish ourselves through our teamwork, service, innovation and global reach.”
Marsh has over 23,000 employees, and provides advice and transactional capabilities to clients in over 100 countries. Marsh is a unit of Marsh & McLennan Companies.