Aon Corp. said it has obtained a green light from five government agencies in three states to amend its settlement agreement so that the brokerage could accept contingent commissions on its managing general agency business.
The Chicago-based broker said late yesterday it had entered into the amendment agreement with the attorneys general of New York, Illinois and Connecticut as well as the insurance departments of New York and Illinois.
National Underwriter reported on Wednesday that Aon entered into the agreement. The changes are identical to amendments that insurance broker Marsh (a subsidiary of New York-based financial services company Marsh & McLennan) and London-headquartered Willis Group Holdings entered into earlier.
Aon said that MGAs or managing general underwriters that act on behalf of a single insurer per program, and accept business from brokers, may now accept contingent compensation from the insurer.
"This amendment correctly recognizes that when we act as an agent for the insurer, it is appropriate for us to accept contingent compensation from the insurer," said Greg Case, Aon's president and chief executive officer.
"We believe that the amendment will give Aon more flexibility to structure its relationships with insurers to the mutual benefit of Aon, insurers and the ultimate insureds. Aon remains committed to the highest levels of client focus and transparency, and this amendment is entirely consistent with those values."
The taking of contingency fees came under attack after New York Attorney General Eliot Spitzer accused brokers at Marsh of steering insurance contracts and creating false bids to trigger lucrative volume-based contingent commission deals. The other brokers were accused of steering contracts that raised questions about whether the placements were in the consumers' best interest.
The country's fourth major brokerage–Itasca, Ill.-based Arthur J. Gallagher–also entered into an agreement that barred the taking of contingent commissions, but its MGA business was not part of the original prohibition, so no amendment was necessary.
The allegations have led to several indictments and guilty pleas from executives at Marsh and some insurers. The brokers also agreed to set up settlement funds totaling close to $1 billion to pay clients who may have been harmed by the alleged inappropriate practices.
The brokers never admitted any criminal wrongdoing, but did apologize to clients.
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