Marsh Plans Public Fee Explanation

Marsh Plans Public Fee Explanation

By Daniel Hays

NU Online News Service, Aug. 17, 4:14 p.m. EDT?Reacting to the controversy over contingent fees that insurers pay to brokers, Marsh brokerage is planning a special Web site posting to explain the issue to customers, the National Underwriter has learned.[@@]

The company wants to be "responsive to a client's desire for enhanced disclosure," said a company spokesman, Al Modugno.

He said he could not provide details, although two industry sources said they were aware that Marsh had planned action along these lines. Notice of the broker's Web site posting, which is due to go up Sept. 1, has been given to policyholders.

An inquiry into possible conflict of interests created by the fees has led to inquiries by the California Insurance Department and New York Attorney General Eliot Spitzer, who has subpoenaed Marsh and other major brokers for information about the practice.

In the wake of the subpoenas, the companies have been holding a series of discussions with Mr. Spitzer's office.

Besides the official action, the fees issue has been the basis for a steady stream of policyholder lawsuits against both large and small brokerages--some of them referring to the fees as hidden "kickbacks."

In its most recent 10 Q filing with the Securities and Exchange Commission, Marsh's parent--Marsh & McClennan Companies--noted a variety of legal proceedings, including some involving "alleged errors and omissions in connection with the placement of insurance or reinsurance."

"Some of these matters seek damages, including punitive damages, in amounts that could, if assessed, be significant," the company said.

Regarding Mr. Spitzer's investigation

"into market service agreements and other similar agreements which compensate brokers for distribution and other services provided to insurance carriers," MMC said "the company has received such a subpoena and is cooperating fully in the investigation."