NU Online News Service, March 26, 12:39 p.m.EDT

A risk management trade group has reacted with pleasure to adeclaration by Marsh insurance brokerage that it will not acceptcontroversial contingent commissions in its U.S. core insurancebroking segment.

The New York-based Risk and Insurance Management Society ispleased with the Marsh decision, a RIMS executive said.

Marsh said it would refuse contingent commissions on anyplacements for any U.S. core broking operation clients, and willcontinue to provide detailed disclosure information ontransactions. This includes all quotes received and compensationinformation.

Marsh & McLennan Agency LLC and Marsh Consumer's affinitysponsored program and personal lines businesses, however, willaccept contingent commissions.

For these segments, the firm said it will provide plain languagedisclosure that meets or exceeds the New York InsuranceDepartment's disclosure Regulation No. 194, as well as all otherapplicable legal and regulatory requirements.

The New York Department's rule, effective next year, followed a2005 investigation revealing that large brokers had been takinghidden fees to steer commercial clients to a group of insurersinvolved in a bid-rigging scheme.

Marsh was among the brokers involved, and as part of 2005settlement agreements, said they would not accept contingentcommissions.

Last month, it was announced that Marsh–as well as Aon Corp. andWillis Group Holdings plc–had reached an agreement with New York,Illinois and Connecticut officials that would permit them to resumetaking the commissions, providing they would abide by New York'snew disclosure regulations. Willis, which abolished contingentcommissions in 2004, said it would not resume taking them.

Terry Fleming, president of RIMS and director, division of riskmanagement for Montgomery County, Md., said in a statement, "RIMSis pleased that Marsh has joined other large brokers in agreeingnot to accept contingent commissions. We call on all brokers tomake the same commitment to their customers."

He added, "Further, we call on the insurance industry to developalternative forms of compensation that do not place the broker inthe position of a conflict of interest in the insurance purchasetransaction."

RIMS has always maintained the position that contingentcommissions should be universally banned and said it views Marsh'sintentions as a positive step forward with regard to its U.S.clients served by its core broking operations.

The organization said it is pleased by Marsh's decision torefrain from accepting contingent commissions for services renderedby its core broking operations, as well as its pledge to practicetransparency regarding its brokerage compensation.

RIMS maintains that contingent commissions impose an inherentconflict of interests upon the insurance buying transaction,regardless of the nature of the client or the intermediary.Contingent commissions also impact pricing, as fees are passedalong to the consumer. RIMS noted that it urges Marsh to adopt aglobal ban on such commissions.

RIMS also said it recognizes that many of its members regardenhanced commissions and contingent commissions as one in the same.To that end, RIMS said it acknowledges Marsh's efforts to collectenhanced commissions on a flat fee, rather than a volume basis, andencourages Marsh, its carrier partners and its clients to continuehaving open and frank discourse over the nature of suchcompensation, how it is collected and disclosed.

RIMS maintained it will continue to work closely with allparties on the issues of producer compensation and disclosure.

The New York disclosure rule, which Marsh agreed to adhere to,requires agents and brokers to describe their role in insurancetransactions and how they are paid. More detailed information willhave to be provided at the client's request. The IndependentInsurance Agents and Brokers of New York has said it will sue toblock the new regulation, arguing that it is too burdensome.